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Half-Year Financial Report as of June 30_ 2010

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Half-Year Financial Report as of June 30, 2010
    Half-Year Financial Report as of June 30, 2010




                     Continental’s Share Price Performance
                     At the start of 2010, Continental’s share price perfor-      Growing speculation regarding the possibility of pay-
                     mance was boosted primarily by a continuing im-              ment default in Greece, together with market partici-
                     provement in the mood on the capital markets. The            pants’ fear of renewed destabilization of the financial
                     capital increase with its 31 million newly-issued shares     system and, as consequence, a global cooling in the
                     was met with great interest by institutional investors. It   economic recovery resulted in the DAX surrendering
                     was closed on January 28, 2010, at an average price          the gains it had made, again dropping well below the
                     of €35.93. With this measure, the free float of the          6,000 points mark. Despite Continental’s good busi-
                     Continental share rose from 11% to nearly 25%, rank-         ness figures, its share was also caught up in this trend.
                     ing Continental amongst the 10 largest companies in          The mid-May downgrading of Continental’s corporate
                     the MDAX as measured by market capitalization. After         credit rating by S&P also adversely affected the share
                     the Continental share reached its highest peak for the       price.
                     year so far at €45.35 on January 8, 2010, concerns
                     about government debt in Portugal, Italy, Ireland, and       At the start of June, the €750 billion rescue package
                     Greece (PIIGs), which had mushroomed as a result of          agreed upon by the EU finance ministers to stabilize
                     the financial and economic crisis, weighed heavily on        the euro reawakened confidence amongst market
                     the capital markets. In response to these concerns,          participants. As a result, the DAX closed the first half
                     the DAX fell early in February, reaching the lowest          of 2010 at nearly the same index level as on Decem-
                     point so far this year at 5,434 points (February 5). The     ber 31, 2009 (5,966 points). The positive economic
                     Continental share could not escape this development,         development also gave Continental the confidence
                     falling 12% to the year’s low so far of €32.13 on Feb-       early in June to raise its year-on-year growth target for
                     ruary 25. The preliminary results for 2009 published on      sales to at least 10% for 2010. As a result of this and
                     February 23, 2010, were met very positively by market        other factors, the Continental share greatly outper-
                     participants, with numerous analysts increasing their        formed the DAX and MDAX, and closed at €42.78 on
                     profit estimates for the current and next fiscal years       June 30, 2010, representing a 17% gain since the
                     and rating the share as a “buy”. Thanks in part to this,     beginning of the year. The share thus outperformed
                     the price recovered, closing first-quarter trading at        the DAX and MDAX by 17 and 10 percentage points
                     €37.55.                                                      respectively. It also did very well in comparison to the
                                                                                  European industrial index for the automotive industry,
                     In response to the positive development of many eco-         showing a 12 percentage points outperformance. The
                     nomic indicators and the resulting anticipation of good      average daily trading volume in the first half of 2010
                     company figures for the first quarter of 2010, the mar-      was 700,000 shares or 1.4% of the free float.
                     ket commenced its upward trend through the end of
                     April, bringing the DAX to its high for the year so far at   Early in July, the announcement that the second quar-
                     6,332 points on April 26. The Continental share was          ter had gone much better than initially expected, along
                     also able to continue its upward trend early in the          with the corresponding improvement in the outlook for
                     second quarter. Investor and analyst response to key         2010 as a whole, brought about a further increase in
                     data for the first quarter published in advance for the      the Continental share price. At times the price jumped
                     Annual Shareholders’ Meeting on April 28, 2010, was          over the €50 mark, reaching a new high for the year so
                     very positive, helping the share price to rise above the     far. The Continental share has thus been one of the
                     €40 mark.                                                    top performers in the automotive sector since the
                                                                                  beginning of the year.




2
 Share Price Performance vs. Major Stock Indexes


 130

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  90

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  70
         January 1, 2010                                                                                June 30, 2010

               Continental       DAX        MDAX          DJ EURO STOXX Automobiles & Parts




Bond placed successfully                                      They bear the securities identification number (WKN)
On July 5, 2010, Continental announced the issuance           A1AY2A and the ISIN number DE000A1AY2A0. Net
of a euro-denominated benchmark bond. Following a             proceeds from the issue were used for early repayment
roadshow that was held for qualified investors in Lon-        of a portion of the syndicated loan taken up by Conti-
don, Frankfurt, Paris and Amsterdam, demand was               nental to finance the acquisition of Siemens VDO
sufficiently high to increase the initially targeted volume   (“VDO loan”) in the summer of 2007.
of at least €500 million to €750 million. The notes were
issued by Conti-Gummi Finance B.V., Amsterdam, the            After successful placement of the eurobond with an
Netherlands, and are guaranteed by Continental Ak-            aggregate principal amount of €750 million on July 9,
tiengesellschaft and certain of its subsidiaries. The         2010, and the resulting improvement in the debt ma-
coupon is 8.5% p.a. Interest is payable semi-annually         turity profile, Moody’s rating agency raised Continen-
in arrears, and the notes have a term of five years. The      tal’s credit rating to B1 (stable outlook). Trading of the
notes are listed on the Open Market (Freiverkehr) of the      new bond also took off strongly, with the bond quoting
Frankfurt Stock Exchange and other stock exchanges.           at 102.5% on the first day of trading (July 16).




                                                                                                                           3
    Half-Year Financial Report as of June 30, 2010




                     Key Figures for the Continental Corporation
                     in € millions                                                              January 1 to June 30             Second Quarter
                                                                                                     2010           2009           2010            2009
                     Sales                                                                       12,654.4        9,063.2        6,657.7          4,761.2
                     EBITDA                                                                       1,824.3          697.2          936.0           447.7
                     in % of sales                                                                    14.4            7.7           14.1             9.4
                     EBIT                                                                         1,011.1         -126.2          516.7            38.8
                     in % of sales                                                                     8.0           -1.4            7.8             0.8
                     Net income attributable to the shareholders of the parent                      348.9         -457.1          121.2          -189.8
                     Earnings per share (in €)                                                        1.74          -2.70           0.61           -1.12


                     Adjusted sales1                                                             12,577.5        8,969.4        6,622.4          4,711.8
                     Adjusted operating result (adjusted EBIT)2                                   1,306.1          248.7          701.4           285.4
                     in % of adjusted sales                                                           10.4            2.8           10.6             6.1


                     Free cash flow                                                                  -43.9         689.8          319.3          1,256.5


                     Net indebtedness at June 30                                                  8,016.9        9,746.6
                     Gearing ratio in %                                                             133.3          186.1


                     Number of employees at June 303                                              142,765        130,534
                     1
                         Before changes in the scope of consolidation.
                     2
                         Before amortization of intangible assets from purchase price allocation (PPA), changes in the scope of consolidation,
                         and special effects.
                     3
                         Excluding trainees.




4
Key Figures for the Core Business Areas
Automotive Group in € millions                                             January 1 to June 30             Second Quarter
                                                                                2010           2009           2010           2009
Sales                                                                        7,858.9        5,359.1        4,088.6      2,837.8
EBITDA                                                                         950.3          173.9          477.9           127.8
in % of sales                                                                    12.1            3.2          11.7             4.5
EBIT                                                                           360.7         -440.7          178.4       -174.4
in % of sales                                                                     4.6           -8.2            4.4           -6.1
Depreciation and amortization1                                                 589.6          614.6          299.5           302.2
Capital expenditure2                                                           238.0          254.3          131.9           104.4
Operating assets (at June 30)                                               11,692.1       12,346.3
Number of employees at June 303                                               83,278         75,731


Adjusted sales4                                                              7,841.9        5,276.4        4,088.6      2,794.3
Adjusted operating result (adjusted EBIT)5                                     605.2         -110.1          305.3            35.8
in % of adjusted sales                                                            7.7           -2.1            7.5            1.3




Rubber Group in € millions                                                 January 1 to June 30            Second Quarter
                                                                                2010           2009           2010           2009
Sales                                                                        4,806.6        3,710.4        2,574.7      1,926.8
EBITDA                                                                         912.9          546.5          497.0           331.4
in % of sales                                                                    19.0           14.7          19.3            17.2
EBIT                                                                           690.7          338.3          377.9           225.4
in % of sales                                                                    14.4            9.1          14.7            11.7
Depreciation and amortization1                                                 222.2          208.2          119.1           106.0
Capital expenditure2                                                           191.7          159.3          119.4            68.6
Operating assets (at June 30)                                                4,145.4        4,013.4
Number of employees at June 303                                               59,259         54,588


Adjusted sales4                                                              4,746.7        3,699.3        2,539.4      1,920.9
Adjusted operating result (adjusted EBIT)5                                     734.0          382.6          414.0           261.9
in % of adjusted sales                                                           15.5           10.3          16.3            13.6
1
    Excluding write-downs of investments.
2
    Capital expenditure on property, plant, equipment and software.
3
    Excluding trainees.
4
    Before changes in the scope of consolidation.
5
    Before amortization of intangible assets from PPA, changes in the scope of consolidation, and special effects.




                                                                                                                                     5
    Half-Year Financial Report as of June 30, 2010




                     Corporate Management Report as of June 30, 2010
                     Signing of the Luxembourg Declaration                        the Hefei plant is striving for an annual output of four
                     At the start of May we signed the Luxembourg Decla-          million car tires. In the long term, capacity is to be
                     ration on Workplace Health Promotion in the European         expanded to deal with the dynamic market growth, not
                     Union. By signing this declaration, Continental is em-       only in China but throughout all of Asia as well.
                     phasizing its corporate responsibility with regards to
                     promoting occupational health and safety. Further-           Football sponsorship activities expanded
                     more, it demonstrates that we share the principles           We are adding to our football sponsoring of the FIFA
                     contained in the declaration and place safety and            World CupTM in South Africa in 2010 and in Brazil in
                     health at work high on our agenda.                           2014 by undertaking for the first time premium spon-
                                                                                  sorship of the DFB Cup and Major League Soccer in
                     The Luxembourg Declaration was adopted by all                the U.S.A., and sponsorship of FC Bayern Munich. In
                     members of the European Network for Workplace                doing so, we wish to put our commitment to pro foot-
                     Health Promotion (ENWHP) in 1997 to foster health            ball on a broader base, expand it further as the central
                     and occupational safety in the companies of member           communication platform at both international and
                     states and to encourage member states to attach              regional level, and take a further step towards clearly
                     greater importance to improving the health and well-         positioning our Continental premium brand with a
                     being of people at work.                                     focus on safety and braking performance.

                     Production of conveyor belts launched in Brazil              Continental equips Mercedes-Benz SLS AMG
                     At the end of April we opened a new production facility      with tires
                     in Ponta Grossa, Brazil, for textile and steel cord con-     The new ContiSportContact 5 P, part of the portfolio
                     veyor belts. The new site boosts our presence on the         of high-tech tires for sports cars and super sports cars
                     South American market and brings us even closer to           since spring, received numerous original equipment
                     our customers. Brazil, by far the largest market, ac-        approvals from various automakers even before its
                     counts for about 50% of total volume in South Ameri-         official production start, including approvals from Mer-
                     ca. ContiTech’s conveyor belt operations produce             cedes-Benz AMG for several of its cars, and in particu-
                     textile and steel cord conveyor belts on a production        lar for its luxury SLS model. The tire offers more than
                     area of 5,000 m2 with an annual capacity of 300 km           just the ultra-high grip and handling performance that
                     conveyor belting.                                            sports car drivers need. It also stands out for an extra
                                                                                  wide margin of safety and handling properties well
                     Production of plastics started                               suited for every-day driving conditions. It was de-
                     We have started producing plastics at the Waltershau-        signed especially for the new vehicles in the super
                     sen plant in Germany. Plastic parts for charge air lines     sports car category.
                     that previously had to be purchased are now manufac-
                     tured using blow-molding technology at the plant. This       Premiere for new trailer tires
                     allows ContiTech Fluid Technology to up its share of         With the introduction of the newly developed HTL 2
                     the value added chain and to combine its good market         ECO-PLUS long-distance trailer tire, we have com-
                     position for elastomer charge-air hoses with a forward-      pleted the family of tire products for international long-
                     looking technology that generates a considerable             distance haulage. The range was launched in 2009
                     benefit versus metal in terms of weight and cost.            and has been expanded successively since. Thanks to
                                                                                  its high-tech carcass and the tread pattern designed
                     Installation of machinery at new Hefei tire plant            especially for long-distance service, the trailer tire
                     Early in July 2010 we celebrated the start of machinery      combines even better fuel-economy figures with con-
                     installation at the new car tire plant in Hefei, China,      siderably longer service life. It sets new standards in
                     thus successfully completing the first phase of the          terms of cost efficiency and transport reliability.
                     project with a construction area of some 70,000 m².
                     The new tire production site in China is part of Conti-      New industrial radial tire
                     nental’s expansion and growth strategy in Asia. The          With the new ContiRT20 Performance, a radial tire,
                     first locally-produced Continental tires are slated to hit   extremely heavy loads can be transported reliably at
                     the market in China early in 2011. In this first stage,      speeds of up to 50 km/h. The RT20 tire is ideal for




6
forklifts and other industrial vehicles used in heavy         velopment stage is expected to reach production
industry and the construction materials industry, but it      readiness in two to three years.
also performs impressively on in-plant transportation
vehicles. The new tire’s properties satisfy customers         New driver assistance system helps at
on all key expectations. For instance, the tread depth        construction sites
was increased to ensure that the tire lasts as long as        As a partner to the AKTIV research initiative (Adaptive
possible, even under the harshest of conditions. In           and Cooperative Technologies for Intelligent Traffic),
addition, the tread design provides reliable traction on      we have developed a new driver assistance system,
unpaved and uneven surfaces. The tire was designed            among other things. The construction site assist helps
with an extremely low rolling resistance for low energy       motorists to stay in their own lane when it is narrow
consumption without neglecting riding comfort.                and not clearly marked, or to brake in time in the case
                                                              of traffic congestion. Thanks to the interplay between
Successful start of Conti360° Fleet Services                  radar and camera technology, the system recognizes
The new Conti360° Fleet Services have established a           lane boundaries, as well as road users up ahead, at
foothold faster than anticipated. They comprise all           the same level, and swinging in or out ahead of the
services having to do with tires for commercial ve-           vehicle. In response, the system intuitively guides the
hicles, including the ContiFitmentService, the Conti-         motorist back to the center of the lane with feedback
BreakdownService and the ContiFleetCheck. In addi-            on the steering wheel, warns him of an impending
tion to being purchased, tires can also be obtained at        front-end collision, and initiates active emergency
a fixed cost per kilometer. The service center in Mu-         braking if required.
nich, Germany, started operations as scheduled. The
service network includes the countries of Belgium, the        Affordable start-stop systems for
Czech Republic, France, Germany, Italy, Poland,               ultra-compact cars
Spain, and UK. Austria and Switzerland will follow next       Cars in the lower price segment are in particularly
year, along with the northern EU countries. Internal          great demand in booming developing countries such
market leaders in the meantime are Germany and                as India or China. Here, a major challenge is to achieve
France, where the most new contracts have been                reductions in fuel consumption and therefore also
concluded. There is an exceptionally positive trend in        pollution emissions. Accordingly, we have developed a
contracts being signed in Eastern Europe.                     new control unit that makes it possible for vehicle
                                                              manufacturers to also equip models of the ultra-
Emergency Steer Assist helps when there is no                 compact category with an automatic start-stop system
time left for braking                                         with little investment within a very short development
With Emergency Steer Assist, we are pursuing an               time. When a vehicle with the system is at a standstill,
entirely new approach to accident-prevention driver           for example in a traffic jam or at red traffic lights, the
assistance systems. While systems in use today are            engine is automatically switched off and then restarted
restricted to intervening in the longitudinal dynamics,       when the driver wants to move off again. As a result,
Emergency Steer Assist is the lateral dynamics com-           we expect everyday fuel consumption in major cities to
plement to Emergency Brake Assist. If the driver of a         be reduced by as much as 15%. The new control unit
vehicle traveling at high speed has gone beyond the           is going to enter series production already in 2010 at
last possible point where braking would have an effect,       its first Asian vehicle manufacturer.
it may still be possible to avoid an accident through
steering, or taking evasive action. Emergency Steer           Continental and Nokia simplify the use of mobile
Assist can help drivers steer past an obstacle. It does       devices in the car
this by accessing technologies which are already              Together with Nokia we are working on a new process
integrated into many vehicles. The lower the friction         that makes it possible for the driver and passengers to
coefficient of the road surface (rain, snow) the greater      show mobile phone applications (apps) unproblemati-
the gap between the “braking” or the “evasion” op-            cally on a display in the car cockpit and to operate the
tions. This means that evasive action is still a possibili-   app via the vehicle’s control elements. This involves
ty long after there is no more hope of avoiding the           integrating a new protocol called Terminal Mode (TM)
accident by emergency braking alone. The initial de-          in vehicles and mobile electronic devices. In their co-




                                                                                                                           7
    Half-Year Financial Report as of June 30, 2010




                     operation, Continental and Nokia want to greatly im-         Economic climate
                     prove the practical usability of services such as tele-      The global economy has continued to stabilize. In view
                     phone, navigation, social networking and music in the        of the good economic development in the first half-
                     car while at the same time making it easier for the          year, the IMF (International Monetary Fund) raised its
                     driver to concentrate on his main task.                      forecast for the year as a whole. It now expects a
                                                                                  4.6% (April: 4.3%) increase in economic activity. Ac-
                     Joint FUEL project gets underway                             cording to the IMF, the global economy was up more
                     Together with the automotive suppliers ZF Friedrichs-        than 5% in the first quarter alone, driven primarily by
                     hafen and ads-tec, we have embarked on a joint               growth in Asia. Many economic indicators (industrial
                     project to develop production techniques for optimiz-        production, trade, consumer confidence and employ-
                     ing the pre-assembly and final assembly stages of            ment figures) showed that the good trend of the first
                     lithium-ion battery modules in hybrid commercial ve-         quarter continued in April and May. The forecast for
                     hicles. This joint project – FUEL or “Future goes Elec-      the year was revised chiefly due to the improved
                     tric” – is being sponsored by the Federal Ministry of        growth prospects for the U.S.A. (3.3%; +0.2% vs.
                     Education and Research as part of the German federal         April), Japan (2.4%; +0.5% vs. April) and what the IMF
                     government’s economic stimulus package II and the            refers to as emerging and developing economies
                     electromobility offensive. The objective of FUEL is to       (+6.8%; +0.5% vs. April). The IMF has left its economic
                     develop innovative manufacturing technologies and to         growth forecast at 1.0% for the Eurozone in 2010. In
                     apply them to the new lithium-ion batteries for trucks       its World Economic Outlook Update dated July 7,
                     and buses. It is also intended to emphasize the Ger-         2010, the IMF however states that the downside risks
                     man automotive industry’s aspiration to secure for           to its more upbeat projections for 2010 have risen
                     itself over the long term a global lead in the intensively   sharply. The reason for this is renewed financial turbu-
                     competitive emerging market for hybrid and electric          lence and the uncertainties as to the further course of
                     drive systems. Once the government-funded project            action in the advanced economies after the ultra-
                     comes to an end in the summer of 2011, further tech-         expansive fiscal policy in 2009. For the year 2011, the
                     nical development of the results it has achieved will be     IMF has left its global economic growth forecast un-
                     pushed forward to the point of industrialization for a       changed at 4.3%.
                     wide variety of customer projects with the aim of series
                     production within Germany of electric vehicle batteries      Thanks to this positive economic development, the
                     for commercial vehicles.                                     number of new light vehicle registrations was able to
                                                                                  continue at the good level of the first quarter. Based
                     Electric powertrain for mass-produced vehicles               on preliminary figures, more than 15.3 million new
                     Starting in 2011, Continental will produce the first         vehicles were registered in the triad markets of Eu-
                     complete electric powertrain for a European car-             rope, NAFTA and Japan (Q1 2010: 7.6 million) in the
                     maker’s standard production vehicle. For this, we have       first half of the year, representing an increase of more
                     invested €12 million in our plant in Gifhorn, Germany.       than 9% compared to the figure for the first half of
                     The annual output is designed initially for up to 60,000     2009. The good development in the first half of 2010 is
                     electric motors. With this step, Continental is putting      attributable mainly to the increase in new vehicle regis-
                     into production the third key component for electro-         trations in the U.S.A. (+17%; Q1/2010: +16%) and
                     mobility, the engine, in addition to the battery and         Japan (+23%; Q1/2010: +24%), whereas the number
                     power electronics.                                           of new registrations on the European market was up
                                                                                  just 1% following the expiration of various state assis-
                                                                                  tance measures (Q1/2010: +10%). In the first half-
                                                                                  year, new registrations were up in the BRIC countries
                                                                                  (Brazil, Russia, India, China), reaching 10.1 million
                                                                                  vehicles (+35%; Q1/2010: +45%). In addition to the
                                                                                  stable trend in new vehicle registrations in Brazil (+7%;
                                                                                  Q1/2010: +17%) and India (+32%; Q1/2010: +31%),
                                                                                  there is a boom on the Chinese market in particular,
                                                                                  where new registrations rose 49% to more than 6.7




8
million units in the first half of 2010. The slowdown in      albeit from a low level. Accordingly, a 46% rise
growth compared to the first quarter of 2010 (+77%) is        (381,000 units) in truck production in Europe and a
attributable primarily to baseline effects. In absolute       17% rise (253,000 units) in NAFTA are anticipated.
terms, 300,000 fewer vehicles were sold to dealers in
China than in the first quarter of 2010. On the Russian       Trends on the tire replacement markets continued to
market, new vehicle registrations are experiencing a          be very positive in the first half of 2010. Demand rose
substantial revival thanks to the state assistance pro-       for replacement passenger tires by 11% in Europe and
gram which has been running since March. Registra-            by 10% in North America compared to the first half of
tions were up in the second quarter by nearly 39%             2009. This rise was due mainly to the comparably low
(Q1/2010: -22%), resulting in an increase of 7.5% in          level of the previous year since the tire replacement
the first half-year. The number of new vehicle registra-      markets in Europe and North America had nosedived
tions worldwide rose 17% to more than 35 million              by 11% and 12% respectively in the first half of 2009.
vehicles in the first half-year, after the market had still   In view of this gratifying development, we are also
declined by nearly 17% in the first half of 2009.             increasing our forecast for both of the tire replacement
                                                              markets to between +4% and +6%.
In response to the strong development in new registra-
tions, global light vehicle output also rose again sub-       Demand for replacement truck tires also developed
stantially in the first six months compared to the same       positively in the first half of 2010, rising 27% in Europe
period of 2009 (24.8 million units) to nearly 35 million      and nearly 28% in North America. This substantial
units (Q1/2010: 17.8 million), corresponding to an            increase was due in particular also to the low level of
increase of more than 41%. Production was also up             the previous year. It was not, however, possible to
more than 34% to some 15 million units in the North           match the volume levels of 2008. For the year, though,
American and European markets where Continental’s             we are sticking with our original forecast of +9% for
Automotive Group generates some 77% of its sales,             the European truck tire replacement market due to the
after sales had plummeted by as much as 40% in the            substantial recovery that started the second half of
previous year (H1/2009). In Japan, more than 4.2              2009, but are raising our forecast for the North Ameri-
million light vehicles were produced in the first half-       can truck tire replacement market to 16% (April: 8%).
year. This is equivalent to a 46% (Q1/2010: 53%)
increase compared to the first quarter of 2009.

Given the very strong first half-year, the forecasts
which had already been revised after the first quarter
for light vehicle output in Europe (forecast April 2010:
+2% to 17.1 million units) and in NAFTA (forecast April
2010: +26% to 10.7 million units) appear to be too
low, as there is no sign at present of a substantial
decrease in volumes for the rest of the year, except for
the normal seasonal fluctuations. For that reason, we
are increasing our full-year forecast for Europe by a
further 600,000 vehicles to 17.7 million units (+6% vs.
2009) and for NAFTA also by a further 800,000 ve-
hicles to 11.5 million units (+34% vs. 2009).

Heavy vehicle production is picking up once again.
Due to the low basis of the previous year (H1 2009 vs.
H1 2008: Europe -65% and NAFTA -50%), commer-
cial vehicle output increased in the first half of 2010 in
Europe and North America by 29% and 17% respec-
tively. In line with current forecasts, we expect sub-
stantially higher growth for the year on the whole,




                                                                                                                           9
     Half-Year Financial Report as of June 30, 2010




                      Earnings, Financial and Net Assets Position of the Continental Corporation

                      Earnings Position                                             cell that had been put on hold in Hanover-Stöcken,
                      Sales up 39.6%;                                               Germany, was ultimately not put back into operation
                      Sales up 36.4% before changes in the scope of                 on account of the weak market recovery. This led to
                      consolidation and exchange rate effects                       further restructuring expenses totaling €32.0 million in
                      Consolidated sales for the first six months of 2010           the first half of 2010.
                      jumped 39.6% year-on-year to €12,654.4 million (PY:
                      €9,063.2 million). Before changes in the scope of             There were also expenses amounting to €18.5 million,
                      consolidation and exchange rate effects, sales were           primarily from restructuring measures and severance
                      up by 36.4%. This increase resulted primarily from the        payments (Chassis & Safety €2.1 million, Powertrain
                      recovery of our markets compared to the first half of         €6.7 million, Interior €2.1 million, Passenger and Light
                      2009, when the lowest sales figures during the global         Truck Tires €4.5 million, Commercial Vehicle Tires €0.7
                      economic crisis were posted.                                  million, ContiTech €2.1 million, Holding €0.3 million).

                      Adjusted EBIT up €1,057.4 million                             In the Commercial Vehicle Tires division, income of
                      The adjusted EBIT for the corporation was up in the           €3.2 million was realized as an aftereffect of the sale of
                      first six months of 2010 compared with the same               our North American OTR activities to the Titan Tire
                      period of 2009 by €1,057.4 million, or 425.2%, to             Corporation in 2006.
                      €1,306.1 million (PY: €248.7 million), equivalent to
                      10.4% (PY: 2.8%) of adjusted sales.                           Due to the anticipated higher cash outflow for the VDO
                                                                                    loan resulting from higher interest margins, the carry-
                      EBIT up €1,137.3 million                                      ing amount was adjusted as expense in 2009, as well
                      In the first half of 2010, consolidated EBIT was up           as in June 2010. These deferrals are being amortized
                      €1,137.3 million on the previous year to €1,011.1             over the term of the loan and reduce expenses ac-
                      million (PY: -€126.2 million), an increase of 901.2%.         cordingly, thus leading to an expense of €27.4 million
                      The return on sales increased to 8.0% (PY: -1.4%).            in the first half of 2010 for the carrying amount adjust-
                                                                                    ment, which was partially offset by a positive effect
                      Special effects in the first half of 2010                     from amortization totaling €20.5 million.
                      In the first half of 2010, there was a gain of €0.5 million
                      in the Chassis & Safety division from the reversal of a       Total consolidated net expense from special effects in
                      previous impairment charge. Impairment losses total-          the first half of 2010 amounted to €70.3 million.
                      ing €7.8 million were recognized in the Powertrain
                      division.                                                     Special effects in the first half of 2009
                                                                                    In the Interior division, the product portfolio was re-
                      In the Interior division, expenses of €4.9 million were       viewed in 2008 in conjunction with the acquisition of
                      recognized in the first half of 2010 for further winding-     Siemens VDO, and business sections in the non-OE
                      up activities in conjunction with the disposal of a busi-     sector were identified that are not part of our core
                      ness operation. There was a gain of €2.1 million in the       business. The sale process was initiated for one of
                      Interior division and a tax expense of the same amount        these business sections already in 2008, leading to
                      for the corporation resulting from the winding-up ac-         recognition of further impairment losses in the amount
                      tivities related to the disposal of an associated compa-      of €2.4 million in 2009.
                      ny.
                                                                                    The associate Hyundai Autonet Co. Ltd., Kyoungki-do,
                      In the Passenger and Light Truck Tires division, there        South Korea, of the Interior division was sold at a price
                      were further restructuring expenses of €6.0 million for       of €126.6 million. The transaction resulted in recogni-
                      the closure of tire production in Clairoix, France.           tion of impairment losses in the amount of €73.6 mil-
                                                                                    lion.
                      Due to plummeting demand for commercial vehicles in
                      Europe as a result of the economic crisis, Continental        The closure and transfer of Western European loca-
                      had to reduce production capacities at all European           tions of the Fluid Technology business unit in the
                      commercial vehicle tire locations in 2009. A production




10
ContiTech division led to restructuring expenses of          the VDO loan with a current committed volume of
€25.6 million in the first half of 2009.                     €9,916.9 million, rose only slightly by €0.4 million year-
                                                             on-year to -€352.9 million (PY: -€352.5 million).
The antitrust proceedings initiated in 2007 against
Dunlop Oil & Marine Ltd., UK, a subsidiary of Conti-         The main reason for the interest expense being nearly
Tech AG, in the area of offshore hoses, resulted in          on par with the previous year’s figure is the higher
further expenses of €1.2 million.                            margins for the VDO loan compared to the previous
                                                             year as a consequence of the deterioration in the
For the ContiTech division, the first consolidation of       credit rating over the course of 2009. This negative
the conveyor belt company Kolubara Univerzal D.O.O.          impact could be almost fully offset by the lower market
led to a gain of €0.7 million from the negative balance.     interest rate and the substantial reduction in net in-
                                                             debtedness. The latter resulted primarily from the
In addition, the Automotive Group incurred expenses,         capital increase which was implemented successfully
chiefly from restructuring measures, totaling €5.2           in January 2010, and from the very strong free cash
million in the first six months of 2009.                     flow at the end of 2009. The higher margins were
                                                             mainly attributable to the renegotiation in December
The Rubber Group incurred expenses totaling €3.4             2009 of the covenants contained in the VDO loan
million in the first half of 2009, primarily from restruc-   agreement. In addition, net interest expense was also
turing measures.                                             negatively impacted in the first half of 2010 by addi-
                                                             tional expenses for financing in connection with the
The cost-cutting program initiated worldwide in re-          aforementioned renegotiation of the loan covenants.
sponse to the economic crisis led to expenses for
severance payments of €36.2 million.                         Income tax expense
                                                             Income tax expense in the first six months of 2010
Total consolidated net expense from special effects in       amounted to €303.2 million (PY: income of €13.2
the first half of 2009 amounted to €146.9 million.           million).

Research and development expenses                            Tax expense in the period under review was influenced
In the first half of 2010, research and development          primarily by the €88.0 million valuation allowance of
expenses rose by 3.3% compared with the same                 deferred tax assets resulting from interest carryfor-
period of 2009 to €754.4 million (PY: €730.6 million),       wards in Germany. The valuation allowance included
representing 6.0% (PY: 8.1%) of sales. Of that sum,          both the interest carryforwards from 2009 measured at
€640.9 million (PY: €619.2 million) was attributable to      the relevant tax rate totaling €68.9 million as well as
the Automotive Group, corresponding to 8.2% (PY:             increases of the year under review amounting to €19.1
11.6%) of sales, and €113.5 million (PY: €111.4 mil-         million in full, taking into account tax planning options.
lion) to the Rubber Group, corresponding to 2.4% (PY:        Utilization of the interest carryforwards does not ap-
3.0%) of sales.                                              pear to be sufficiently probable at this point in time, in
                                                             view of the rating downgrade of Continental AG in May
Net interest expense                                         2010 in particular, together with higher interest mar-
At -€321.9 million, net interest expense improved            gins on existing loans, as well as the resulting future
slightly by €7.3 million in the first half of 2010 com-      increases in interest burden from the issuance of the
pared with the same period of last year (PY: -€329.2         eurobond with an aggregate principal amount of
million). This decrease was due, among other things,         €750.0 million in July 2010.
to (mostly non-cash) effects of exchange rate changes,
as well as effects from changes in the fair value of         Tax expense in the first half of 2009 was influenced
derivative instruments which, at €19.1 million, were         primarily by the valuation allowance of deferred tax
€11.5 million up on the previous year’s figure of €7.6       assets on tax loss and interest carryforwards in an
million. For the first six months of 2010, interest in-      amount of €107.0 million in Germany. This was neces-
come was €11.9 million (PY: €15.7 million). Interest         sary because, according to the opinion of the German
expense, which was due primarily to the utilization of       finance authorities, a harmful change of shareholder




                                                                                                                          11
     Half-Year Financial Report as of June 30, 2010




                      already occurred according to Section 8c of the
                      Körperschaftsteuergesetz (German Corporate Tax
                      Law) since, with the acquisition of shares by Schaeffler
                      KG in 2008, the 25% threshold was exceeded. Conti-
                      nental does not agree with this interpretation of the
                      law and has already appealed the decision in a test
                      case.

                      Since 2008, a limit on the deductible interest that can
                      be carried forward has applied in Germany. The
                      amount deductible under the tax law is limited to 30%
                      of the taxable income before write-downs and interest.

                      Net income attributable to the shareholders of the
                      parent
                      Net income attributable to the shareholders of the
                      parent was up 176.3% to €348.9 million (PY: -€457.1
                      million), with earnings per share higher at €1.74 (PY:
                      -€2.70).




12
Development of the Continental Corporation

in € millions                                                              January 1 to June 30            Second Quarter
                                                                                2010           2009           2010          2009
Sales                                                                       12,654.4        9,063.2        6,657.7     4,761.2
EBITDA                                                                       1,824.3          697.2          936.0          447.7
in % of sales                                                                    14.4            7.7          14.1            9.4
EBIT                                                                         1,011.1         -126.2          516.7           38.8
in % of sales                                                                     8.0           -1.4            7.8           0.8
Net income attributable to the shareholders of the parent                      348.9         -457.1          121.2      -189.8
Earnings per share (in €)                                                        1.74          -2.70          0.61          -1.12
Research and development expenses                                              754.4          730.6          379.4          344.1
Depreciation and amortization1                                                 813.2          823.4          419.3          408.9
Capital expenditure2                                                           430.1          413.7          252.0          173.9
Operating assets (at June 30)                                               15,786.0       16,402.6
Number of employees at June 303                                              142,765        130,534


Adjusted sales4                                                             12,577.5        8,969.4        6,622.4     4,711.8
Adjusted operating result (adjusted EBIT)5                                   1,306.1          248.7          701.4          285.4
in % of adjusted sales                                                           10.4            2.8          10.6            6.1


Net indebtedness at June 30                                                  8,016.9        9,746.6
Gearing ratio in %                                                             133.3          186.1
1
    Excluding write-downs of investments.
2
    Capital expenditure on property, plant, equipment and software.
3
    Excluding trainees.
4
    Before changes in the scope of consolidation.
5
    Before amortization of intangible assets from PPA, changes in the scope of consolidation, and special effects.



Financial Position                                                   Since in the period under review there were no effects
Cash flow                                                            comparable to the refunds effected from Contractual
At €383.0 million, net cash flow from operating activi-              Trust Arrangements (CTAs) in the first two quarters of
ties as of June 30, 2010, was €614.6 million lower                   2009 totaling €112.1 million, changes in pension pro-
than on June 30, 2009 (€997.6 million).                              visions resulted in a decrease of €107.2 million to
                                                                     €26.9 million (PY: €134.1 million). Tax payments,
In the first half of 2010, free cash flow stood at -€43.9            which rose €181.9 million to €228.4 million (PY: €46.5
million (PY: €689.8 million), down €733.7 million on the             million), also had a negative impact compared with the
same period of 2009.                                                 same period of 2009.

For the first two quarters of 2010, EBIT amounted to                 In the first half of 2010, total cash outflows amounting
€1,011.1 million (PY: -€126.2 million), which corre-                 to €426.9 million (PY: €307.8 million) resulted from
sponds to a year-on-year increase of €1,137.3 million.               investment activities. In the period under review, there
This effect, however, was more than offset by the                    was no single positive effect comparable to the cash
increase in operating working capital due to the im-                 flow of €126.6 million provided by the sale of the as-
proved sales situation, which led to a cash outflow of               sociate Hyundai Autonet Co., Ltd. in June 2009.
€1,355.7 million measured against the same period of
2009. Compared to the first half of 2009, this increase              Financing
in working capital, which had an effect on cash and                  At €8,016.9 million, net indebtedness for the corpora-
cash equivalents, resulted primarily from a €1,000.3                 tion on June 30, 2010, was €878.6 million lower than
million increase in operating receivables.                           on December 31, 2009, and €1,729.7 million lower




                                                                                                                                    13
     Half-Year Financial Report as of June 30, 2010




                      than on June 30, 2009 (€9,746.6 million). This reduc-         lion in the second quarter of 2010. On June 30, 2010,
                      tion in net indebtedness was attributable mainly to the       the value of the carrying amount adjustments made in
                      capital increase, which was implemented successfully          2009 and 2010 totaled €71.4 million. This deferral will
                      in January 2010 and led to net proceeds of €1,056.0           be amortized over the term of the VDO loan, and re-
                      million (before tax effects), as well as to the very strong   duces expenses accordingly.
                      free cash flow at the end of 2009. The resulting
                      strengthening of the company’s capital base, in con-          As of June 30, 2010, Continental had at its disposal
                      junction with the reduction of net indebtedness, pro-         liquidity reserves totaling €3,827.1 million (PY:
                      duced a significant year-on-year improvement in the           €4,024.7 million), consisting of cash and cash equiva-
                      gearing ratio which amounted to 133.3% on June 30,            lents of €1,239.4 million (PY: €2,000.5 million) as well
                      2010 (PY: 186.1%).                                            as unused credit lines totaling €2,587.7 million (PY:
                                                                                    €2,024.2 million).
                      As of June 30, 2010, the VDO loan had been drawn
                      on by Continental AG and Continental Rubber of                Capital expenditure (additions)
                      America, Corp. (CRoA), Wilmington, U.S.A., in a no-           In the first two quarters of 2010, €430.1 million (PY:
                      minal amount of €7,685.4 million (PY: €10,145.3 mil-          €413.7 million) was invested in property, plant, equip-
                      lion). With the repayment of tranche A due in August          ment and software, €0.1 million (PY: €0.0 million) of
                      2009 (nominal amount of €800.0 million) and the par-          which resulted from the capitalization of borrowing
                      tial repayment of tranche B in the first half of 2010, the    costs. This corresponds to a capital expenditure ratio
                      total committed amount of this loan as of June 30,            after six months of 3.4% (PY: 4.6%).
                      2010, decreased to €9,916.9 million (PY: €11,800.0
                      million). In accordance with the agreement, the net           €238.0 million (PY: €254.3 million) of the investments
                      proceeds from the capital increase (before tax effects)       was attributable to the Automotive Group, correspond-
                      in January 2010 and from the sale of companies were           ing to 3.0% (PY: 4.7%) of sales.
                      used for the partial repayment of tranche B due in
                      August 2010, which had been drawn upon in an                  The Automotive Group invested primarily in production
                      amount of €2,416.9 million (PY: €3,500.0 million) as of       equipment for the manufacture of new products and
                      the end of June. With the capital increase, Continental       the implementation of new technologies such as elec-
                      has fulfilled the condition for the provision of a forward    tronic brake and safety systems as well as engine and
                      start facility (FSF) with a maximum volume of €2,500.0        transmission control units, with investment being fo-
                      million for the refinancing of tranche B in August 2010.      cused on manufacturing capacities at best-cost loca-
                      This condition was part of the refinancing package            tions.
                      concluded successfully in December 2009 to improve
                      the financial and capital structure. For tranche C with a
                      nominal value of €5,000.0 million due in August 2012,
                      there were interest hedges at the end of June 2010
                      amounting to €3,125.0 million (PY: €3,125.0 million).
                      The resulting average fixed interest rate to be paid is
                      4.19% (PY: 4.19%) plus margin. For the loan issued by
                      the European Investment Bank (EIB) for an original
                      amount of €600.0 million, early partial repayments
                      totaling €300.0 million were undertaken in March
                      2009, August 2009 and January 2010. The nominal
                      amount of the EIB loan drawn thus decreased to
                      €300.0 million.

                      The rating was again downgraded in May 2010, result-
                      ing in an increase in the interest margins. Due to the
                      anticipated higher cash outflows for the VDO loan, the
                      carrying amount was adjusted by a further €27.4 mil-




14
Change in net indebtedness
                                                                        January 1 to June 30          Second Quarter
in € millions                                                               2010          2009          2010           2009
Cash provided by operating activities                                       383.0         997.6        579.0        1,292.9
Cash used for investing activities                                         -426.9        -307.8       -259.7           -36.4
Cash flow before financing activities (free cash flow)                      -43.9         689.8        319.3        1,256.5
Dividends paid and repayment of capital to non-controlling interests        -22.1          -7.4         -21.2           -1.4
Proceeds from the issuance of shares                                      1,056.0              —         -0.8            —
Non-cash changes                                                            -54.2          25.7         -33.2          10.0
Other                                                                       -23.0          29.4         -20.5           -1.5
Foreign exchange effects                                                    -34.2          -0.6         -28.6          31.3
Change in net indebtedness                                                  878.6         736.9        215.0        1,294.9




The Rubber Group invested €191.7 million (PY: €159.3               Total assets were up €1,436.7 million compared with
million), which is equivalent to 4.0% (PY: 4.3%) of                December 31, 2009. This was due mainly to a
sales. Key investment priorities were the plant set-up             €1,583.4 million rise in inventories and amounts re-
in China, capacity expansions for car tire production at           ceivable as a result of seasonal factors and the in-
our South American and European plants, as well as                 creasing business activities. Conversely, the reduction
quality assurance and cost-cutting measures. Conti-                in cash and cash equivalents brought total assets
Tech invested in rationalizing production processes                down by €473.4 million.
and in new products. Production capacities in China,
Hungary and Romania were expanded.                                 Total equity including non-controlling interests was up
                                                                   €1,952.2 million compared with the end of 2009, due
Net Assets Position                                                primarily to the proceeds from the capital increase,
At €24,485.9 million, total assets on June 30, 2010,               positive exchange rate effects of €510.7 million, and
were €224.6 million higher than on the same date in                the net income attributable to the shareholders of the
2009 (€24,261.3 million). This increase was due pri-               parent of €348.9 million. The gearing ratio improved
marily to higher inventories and trade accounts receiv-            from 219.0% to 133.3%.
able totaling €1,858.6 million as a result of the increas-
ing business activities. Deferred tax assets were up by            Employees
€283.7 million. This was offset by the decrease in                 At the end of the second quarter, the corporation’s
goodwill at €751.8 million, due particularly to the im-            employees numbered 142,765, an increase of 8,331
pairment in the fall of 2009, as well as by the other              compared with the end of 2009. Growth in volumes,
intangible assets at €363.6 million, owing primarily to            above all in the Automotive Group and the ContiTech
amortization from PPA. The decline in cash and cash                division, led to workforce increases of 5,248 and
equivalents of €761.1 million was a result of the de-              2,840 respectively. The number of employees working
crease in debt and other factors.                                  for the Tire divisions rose by 236 as a result of capaci-
                                                                   ty adjustments.
At €6,013.9 million, total equity including non-
controlling interests was up €775.5 million compared               Compared with the reporting date for 2009, there were
with June 30, 2009. The proceeds from the capital                  12,231 more employees in the corporation.
increase in January 2010 of €1,073.3 million, taking
into account the issuing costs and the corresponding
tax effects and positive exchange rate effects totaling
€502.1 million, offset the negative net income attribut-
able to the shareholders of the parent of €843.2 mil-
lion. The gearing ratio improved from 186.1% to
133.3%.




                                                                                                                               15
     Half-Year Financial Report as of June 30, 2010




                      Development of the Divisions

                      Chassis & Safety in € millions                                             January 1 to June 30            Second Quarter
                                                                                                      2010           2009           2010          2009
                      Sales                                                                        2,827.4        1,916.1        1,473.0     1,049.4
                      EBITDA                                                                         469.3          222.0          239.7          153.3
                      in % of sales                                                                    16.6           11.6          16.3           14.6
                      EBIT                                                                           309.2            56.4         160.2           71.0
                      in % of sales                                                                    10.9            2.9          10.9            6.8
                      Depreciation and amortization1                                                 160.1          165.6           79.5           82.3
                      Capital expenditure2                                                             69.8           61.8          39.4           30.9
                      Operating assets (at June 30)                                                4,051.8        4,143.1
                      Number of employees at June 303                                               28,875         25,601


                      Adjusted sales4                                                              2,827.4        1,913.1        1,473.0     1,047.9
                      Adjusted operating result (adjusted EBIT)5                                     337.7            88.1         174.6           87.7
                      in % of adjusted sales                                                           11.9            4.6          11.9            8.4
                      1
                          Excluding write-downs of investments.
                      2
                          Capital expenditure on property, plant, equipment and software.
                      3
                          Excluding trainees.
                      4
                          Before changes in the scope of consolidation.
                      5
                          Before amortization of intangible assets from PPA, changes in the scope of consolidation, and special effects.



                      Chassis & Safety                                                     ness units. Moreover, the first half of 2009 had been hit
                      Sales volumes                                                        the hardest by the global economic crisis.
                      Sales volumes in the Electronic Brake Systems busi-
                      ness unit jumped year-on-year by 52.6% to 8.3 million                Adjusted EBIT up €249.6 million
                      units in the first half of 2010.                                     The Chassis & Safety division’s adjusted EBIT rose in
                                                                                           the first six months of 2010 compared with the same
                      In the Hydraulic Brake Systems business unit, sales of               period of 2009 by €249.6 million, or 283.3%, to
                      brake boosters were up 48.9% to 7.7 million units.                   €337.7 million (PY: €88.1 million), equivalent to 11.9%
                      Brake caliper sales rose to 16.0 million units, equiva-              (PY: 4.6%) of adjusted sales.
                      lent to an increase of 41.3%.
                                                                                           EBIT up €252.8 million
                      In the Passive Safety & Advanced Driver Assistance                   Compared with the same period of last year, the Chas-
                      Systems business unit, sales of air bag control units                sis & Safety division reported an increase in EBIT of
                      increased by 21.4% to 6.4 million units. Sales of driver             €252.8 million, or 448.2%, to €309.2 million (PY: €56.4
                      assistance systems soared to 455,100 units, an in-                   million) in the first half of 2010. The return on sales
                      crease of 105.2%.                                                    increased to 10.9% (PY: 2.9%).

                      Sales up 47.6%;                                                      Special effects in the first half of 2010
                      Sales up 44.0% before changes in the scope of                        In the first half of 2010, the Chassis & Safety division
                      consolidation and exchange rate effects                              incurred expenses for restructuring measures and
                      Sales of the Chassis & Safety division rose by 47.6% to              severance payments totaling €2.1 million.
                      €2,827.4 million in the first six months of 2010 com-
                      pared with the same period of 2009 (PY: €1,916.1                     In the first half of 2010, there was a gain of €0.5 million
                      million). Before changes in the scope of consolidation               from the reversal of a previous impairment charge.
                      and exchange rate effects, sales were up by 44.0%.
                      The increase was the result of the recovery of all busi-




16
For the Chassis & Safety division, the total net expense
from special effects amounted to €1.6 million in the
first half of 2010.

Special effects in the first half of 2009
Unutilized provisions of €1.6 million were reversed in
the Chassis & Safety division as part of the winding-up
of restructuring activities at the plant in Dortmund,
Germany.

The cost-cutting program initiated worldwide in re-
sponse to the economic crisis led to expenses for
severance payments totaling €6.7 million in the first
half of 2009.

The total net expense from special effects in the first
half of 2009 amounted to €5.1 million for the Chassis &
Safety division.




                                                           17
     Half-Year Financial Report as of June 30, 2010




                      Powertrain in € millions                                                   January 1 to June 30            Second Quarter
                                                                                                      2010           2009           2010          2009
                      Sales                                                                        2,310.3        1,487.5        1,204.8          797.0
                      EBITDA                                                                         176.2           -31.9          92.8            5.4
                      in % of sales                                                                     7.6           -2.1            7.7           0.7
                      EBIT                                                                            -43.7        -252.7           -22.1     -102.4
                      in % of sales                                                                    -1.9          -17.0           -1.8         -12.8
                      Depreciation and amortization1                                                 219.9          220.8          114.9          107.8
                      Capital expenditure2                                                             97.5         127.9           48.5           49.8
                      Operating assets (at June 30)                                                3,215.2        3,662.9
                      Number of employees at June 303                                               25,676         23,102


                      Adjusted sales4                                                              2,293.3        1,452.9        1,204.8          778.7
                      Adjusted operating result (adjusted EBIT)5                                       58.4        -146.3           36.4          -44.3
                      in % of adjusted sales                                                            2.5          -10.1            3.0          -5.7
                      1
                          Excluding write-downs of investments.
                      2
                          Capital expenditure on property, plant, equipment and software.
                      3
                          Excluding trainees.
                      4
                          Before changes in the scope of consolidation.
                      5
                          Before amortization of intangible assets from PPA, changes in the scope of consolidation, and special effects.




                      Powertrain                                                           Adjusted EBIT up €204.7 million
                      Sales volumes                                                        The Powertrain division’s adjusted EBIT was up in the
                      Thanks to the continuing positive trend in all sales                 first six months of 2010 compared with the same
                      markets, it was possible to up sales by more than 50%                period of 2009 by €204.7 million, or 139.9%, to €58.4
                      in the first half of 2010 compared to the same period                million (PY: -€146.3 million), equivalent to 2.5% (PY:
                      of 2009, with above-average growth being achieved in                 -10.1%) of adjusted sales.
                      Asia. All of the Powertrain division’s business units
                      were able to increase their sales volumes, with trans-               EBIT up €209.0 million
                      mission control units, injection pumps and nitrogen                  Compared with the same period of last year, the
                      oxide sensors recording exceptionally high growth                    Powertrain division reported an increase in EBIT of
                      rates.                                                               €209.0 million, or 82.7%, to -€43.7 million (PY:
                                                                                           -€252.7 million) in the first half of 2010. The return on
                      Sales up 55.3%;                                                      sales increased to -1.9% (PY: -17.0%).
                      Sales up 54.7% before changes in the scope of
                      consolidation and exchange rate effects                              Special effects in the first half of 2010
                      Sales of the Powertrain division rose by 55.3% to                    In the first half of 2010, the Powertrain division in-
                      €2,310.3 million in the first six months of 2010 com-                curred expenses for restructuring measures and sev-
                      pared with the same period of 2009 (PY: €1,487.5                     erance payments totaling €6.7 million.
                      million). Before changes in the scope of consolidation
                      and exchange rate effects, the increase was 54.7%,                   Impairment losses totaling €7.8 million were recog-
                      due primarily to the substantial recovery of the markets             nized in the Powertrain division.
                      compared to the first half of 2009.
                                                                                           For the Powertrain division, the total net expense from
                                                                                           special effects in the first half of 2010 amounted to
                                                                                           €14.5 million.




18
Special effects in the first half of 2009
In the first six months of 2009, the Powertrain division
incurred expenses totaling €5.9 million, primarily from
restructuring measures.

The cost-cutting program initiated worldwide in re-
sponse to the economic crisis led to expenses for
severance payments of €7.8 million.

The total net expense from special effects in the first
half of 2009 amounted to €13.7 million for the Power-
train division.




                                                           19
     Half-Year Financial Report as of June 30, 2010




                      Interior in € millions                                                     January 1 to June 30            Second Quarter
                                                                                                      2010           2009           2010          2009
                      Sales                                                                        2,776.8        2,004.3        1,436.5     1,013.7
                      EBITDA                                                                         304.8           -16.2         145.3          -30.9
                      in % of sales                                                                    11.0           -0.8          10.1           -3.0
                      EBIT                                                                             95.2        -244.4           40.3      -143.0
                      in % of sales                                                                     3.4          -12.2            2.8         -14.1
                      Depreciation and amortization1                                                 209.6          228.2          105.0          112.1
                      Capital expenditure2                                                             70.7           64.5          44.0           23.7
                      Operating assets (at June 30)                                                4,425.2        4,540.2
                      Number of employees at June 303                                               28,727         27,028


                      Adjusted sales4                                                              2,776.8        1,959.2        1,436.5          990.0
                      Adjusted operating result (adjusted EBIT)5                                     209.1           -51.9          94.3           -7.6
                      in % of adjusted sales                                                            7.5           -2.6            6.6          -0.8
                      1
                          Excluding write-downs of investments.
                      2
                          Capital expenditure on property, plant, equipment and software.
                      3
                          Excluding trainees.
                      4
                          Before changes in the scope of consolidation.
                      5
                          Before amortization of intangible assets from PPA, changes in the scope of consolidation, and special effects.



                      Interior                                                             million). Before changes in the scope of consolidation
                      Sales volumes                                                        and exchange rate effects, the increase was 36.7%,
                      Sales volumes in the Body & Security business unit                   which resulted primarily from the substantial recovery
                      rose for all product groups in the first half-year of                of the markets compared to the first half of 2009.
                      2010. Particularly high increases were achieved for tire
                      information systems, fuel pump electronics, and in the               Adjusted EBIT up €261.0 million
                      battery & energy management business.                                The Interior division’s adjusted EBIT was up in the first
                                                                                           six months of 2010 compared with the same period of
                      Quantities of digital tachographs rose only slightly in              2009 by €261.0 million, or 502.9%, to €209.1 million
                      the Commercial Vehicles & Aftermarket business unit.                 (PY: -€51.9 million), equivalent to 7.5% (PY: -2.6%) of
                                                                                           adjusted sales.
                      In the Infotainment & Connectivity business unit, sales
                      volumes of audio components, connectivity systems                    EBIT up €339.6 million
                      and multimedia systems were up, thanks in particular                 Compared with the same period of last year, the Inte-
                      to the positive development in sales to our U.S. cus-                rior division reported an increase in EBIT of €339.6
                      tomers.                                                              million, or 139.0%, to €95.2 million (PY: -€244.4 mil-
                                                                                           lion) in the first half of 2010. The return on sales in-
                      In the Instrumentation & Driver HMI business unit,                   creased to 3.4% (PY: -12.2%).
                      sales of instrument clusters and displays were sub-
                      stantially higher than in the previous year.                         Special effects in the first half of 2010
                                                                                           In the Interior division, expenses of €4.9 million were
                      Sales up 38.5%;                                                      recognized in the first half of 2010 for further winding-
                      Sales up 36.7% before changes in the scope of                        up activities in conjunction with the disposal of a busi-
                      consolidation and exchange rate effects                              ness operation. There was a gain of €2.1 million and a
                      Sales of the Interior division rose by 38.5% to                      tax expense of the same amount for the corporation
                      €2,776.8 million in the first six months of 2010 com-                resulting from the winding-up activities related to the
                      pared with the same period of 2009 (PY: €2,004.3                     disposal of an associated company.




20
In addition, there were further restructuring expenses
and severance payments totaling €2.1 million.

For the Interior division, the total net expense from
special effects in the first half of 2010 amounted to
€4.9 million.

Special effects in the first half of 2009
In the Interior division, the product portfolio was re-
viewed in 2008 in conjunction with the acquisition of
Siemens VDO, and business sections in the non-OE
sector were identified that are not part of our core
business. The sale process was initiated for one of
these business sections in 2008, leading to recognition
of further impairment losses in the amount of €2.4
million.

The associate Hyundai Autonet Co. Ltd., Kyoungki-do,
South Korea, was sold at a price of €126.6 million. The
transaction led to a recognition of impairment losses in
the amount of €73.6 million.

In the first six months of 2009, expenses totaling €0.9
million were incurred, primarily from restructuring
measures.

The cost-cutting program initiated worldwide in re-
sponse to the economic crisis led to expenses for
severance payments of €9.7 million.

The total net expense from special effects in the first
half of 2009 amounted to €86.6 million for the Interior
division.




                                                           21
     Half-Year Financial Report as of June 30, 2010




                      Passenger and Light Truck Tires in € millions                              January 1 to June 30            Second Quarter
                                                                                                      2010           2009           2010          2009
                      Sales                                                                        2,777.9        2,115.2        1,494.9     1,118.1
                      EBITDA                                                                         621.4          399.0          347.2          249.0
                      in % of sales                                                                    22.4           18.9          23.2           22.3
                      EBIT                                                                           501.3          282.8          286.6          190.8
                      in % of sales                                                                    18.0           13.4          19.2           17.1
                      Depreciation and amortization1                                                 120.1          116.2           60.6           58.2
                                            2
                      Capital expenditure                                                            131.2            92.1          88.4           36.3
                      Operating assets (at June 30)                                                2,411.9        2,367.0
                      Number of employees at June 303                                               27,430         25,935


                      Adjusted sales4                                                              2,737.1        2,116.7        1,472.4     1,118.8
                      Adjusted operating result (adjusted EBIT)5                                     509.8          296.8          290.2          199.9
                      in % of adjusted sales                                                           18.6           14.0          19.7           17.9
                      1
                          Excluding write-downs of investments.
                      2
                          Capital expenditure on property, plant, equipment and software.
                      3
                          Excluding trainees.
                      4
                          Before changes in the scope of consolidation.
                      5
                          Before amortization of intangible assets from PPA, changes in the scope of consolidation, and special effects.



                      Passenger and Light Truck Tires                                      Adjusted EBIT up €213.0 million
                      Sales volumes                                                        The Passenger and Light Truck Tires division’s ad-
                      In the Passenger and Light Truck Tires division, year-               justed EBIT rose in the first six months of 2010 com-
                      on-year sales volumes in all regions and business units              pared with the same period of 2009 by €213.0 million,
                      saw strong double-digit percentage growth in the first               or 71.8%, to €509.8 million (PY: €296.8 million), equiv-
                      six months of 2010, with the most significant increase               alent to 18.6% (PY: 14.0%) of adjusted sales.
                      being reported by the Original Equipment business
                      unit.                                                                EBIT up €218.5 million
                                                                                           Compared with the same period of last year, the Pas-
                      In the Replacement Business, growth was highest in                   senger and Light Truck Tires division reported an
                      The Americas and Europe business units. The revival                  increase in EBIT of €218.5 million, or 77.3%, to €501.3
                      of the markets was reflected in the sales figures for all            million (PY: €282.8 million) in the first half of 2010. The
                      units.                                                               return on sales increased to 18.0% (PY: 13.4%).

                      Sales up 31.3%;                                                      Special effects in the first half of 2010
                      Sales up 25.7% before changes in the scope of                        In the Passenger and Light Truck Tires division, there
                      consolidation and exchange rate effects                              were restructuring-related expenses and severance
                      Sales of the Passenger and Light Truck Tires division                payments totaling €10.5 million in the first half of 2010,
                      rose by 31.3% to €2,777.9 million in the first six                   €6.0 million of which was attributable to the closure of
                      months of 2010 compared with the same period of                      tire production in Clairoix, France.
                      2009 (PY: €2,115.2 million). Before changes in the
                      scope of consolidation and exchange rate effects,                    Special effects in the first half of 2009
                      sales were up by 25.7%.                                              In the first six months of 2009, the Passenger and
                                                                                           Light Truck Tires division incurred expenses totaling
                                                                                           €3.8 million, primarily from restructuring measures.




22
The cost-cutting program initiated worldwide in re-
sponse to the economic crisis led to expenses for
severance payments of €8.4 million in the Passenger
and Light Truck Tires division.

The total net expense from special effects in the first
half of 2009 amounted to €12.2 million for the Pas-
senger and Light Truck Tires division.




                                                          23
     Half-Year Financial Report as of June 30, 2010




                      Commercial Vehicle Tires in € millions                                     January 1 to June 30            Second Quarter
                                                                                                      2010           2009           2010          2009
                      Sales                                                                          630.6          477.8          349.8          239.8
                      EBITDA                                                                           47.0           27.6          21.1           20.7
                      in % of sales                                                                     7.5            5.8            6.0           8.6
                      EBIT                                                                             -7.5          -14.0          -13.4          -0.3
                      in % of sales                                                                    -1.2           -2.9           -3.8          -0.1
                      Depreciation and amortization1                                                   54.5           41.6          34.5           21.0
                      Capital expenditure2                                                             18.8           21.1          10.0           10.0
                      Operating assets (at June 30)                                                  647.4          651.4
                      Number of employees at June 303                                                6,910          7,434


                      Adjusted sales4                                                                618.9          476.3          343.0          239.1
                      Adjusted operating result (adjusted EBIT)5                                       24.2          -13.2          17.0            0.0
                      in % of adjusted sales                                                            3.9           -2.8            5.0           0.0
                      1
                          Excluding write-downs of investments.
                      2
                          Capital expenditure on property, plant, equipment and software.
                      3
                          Excluding trainees.
                      4
                          Before changes in the scope of consolidation.
                      5
                          Before amortization of intangible assets from PPA, changes in the scope of consolidation, and special effects.



                      Commercial Vehicle Tires                                             EBIT up €6.5 million
                      Sales volumes                                                        Compared with the same period of last year, the
                      Following a very weak 2009 characterized by plum-                    Commercial Vehicle Tires division reported an increase
                      meting demand, the first half of 2010 saw a substantial              in EBIT of €6.5 million, or 46.4%, to -€7.5 million (PY:
                      revival of the markets, causing sales figures to be                  -€14.0 million) in the first half of 2010. The return on
                      higher than those for the same period last year, but                 sales improved to -1.2% (PY: -2.9%).
                      still below the comparative values for 2008. All busi-
                      ness units outperformed the previous year by double                  Special effects in the first half of 2010
                      digit percentages.                                                   Due to plummeting demand for commercial vehicles in
                                                                                           Europe as a result of the economic crisis, Continental
                      Sales up 32.0%;                                                      had to reduce production capacities at all European
                      Sales up 24.6% before changes in the scope of                        commercial vehicle tire locations in 2009. A production
                      consolidation and exchange rate effects                              cell that had been put on hold in Hanover-Stöcken,
                      Sales of the Commercial Vehicle Tires division rose by               Germany, was ultimately not put back into operation
                      32.0% to €630.6 million in the first six months of 2010              on account of the weak market recovery. This led to
                      compared with the same period of 2009 (PY: €477.8                    further restructuring expenses totaling €32.0 million in
                      million). Before changes in the scope of consolidation               the first half of 2010.
                      and exchange rate effects, sales were up by 24.6%.
                                                                                           In the Commercial Vehicle Tires division, income of
                      Adjusted EBIT up €37.4 million                                       €3.2 million was realized as an aftereffect of the sale of
                      The Commercial Vehicle Tires division’s adjusted EBIT                our North American OTR activities to the Titan Tire
                      rose in the first six months of 2010 compared with the               Corporation in 2006.
                      same period of 2009 by €37.4 million, or 283.3%, to
                      €24.2 million (PY: -€13.2 million), equivalent to 3.9%               In the first half of 2010, the Commercial Vehicle Tires
                      (PY: -2.8%) of adjusted sales.                                       division incurred expenses for severance payments
                                                                                           totaling €0.7 million.




24
For the Commercial Vehicle Tires division, the total net
expense from special effects in the first half of 2010
amounted to €29.5 million.

Special effects in the first half of 2009
Unutilized provisions of €0.2 million were reversed in
the Commercial Vehicle Tires division during the first
half of 2009 as part of the winding-up of restructuring
activities at the plant in Alor Gajah, Malaysia.

The cost-cutting program initiated worldwide in re-
sponse to the economic crisis led to expenses for
severance payments of €0.9 million.

The total net expense from special effects in the first
half of 2009 amounted to €0.7 million for the Com-
mercial Vehicle Tires division.




                                                           25
     Half-Year Financial Report as of June 30, 2010




                      ContiTech in € millions                                                    January 1 to June 30            Second Quarter
                                                                                                      2010           2009           2010          2009
                      Sales                                                                        1,477.7        1,157.0          775.4          588.3
                      EBITDA                                                                         244.4          119.9          128.6           61.7
                      in % of sales                                                                    16.5           10.4          16.6           10.5
                      EBIT                                                                           196.9            69.5         104.7           34.9
                      in % of sales                                                                    13.3            6.0          13.5            5.9
                      Depreciation and amortization1                                                   47.5           50.4          23.9           26.8
                      Capital expenditure2                                                             41.8           46.1          21.2           22.4
                      Operating assets (at June 30)                                                1,086.0          995.0
                      Number of employees at June 303                                               24,919         21,219


                      Adjusted sales4                                                              1,470.3        1,145.9          769.4          582.4
                      Adjusted operating result (adjusted EBIT)5                                     200.0            99.1         106.8           62.1
                      in % of adjusted sales                                                           13.6            8.6          13.9           10.7
                      1
                          Excluding write-downs of investments.
                      2
                          Capital expenditure on property, plant, equipment and software.
                      3
                          Excluding trainees.
                      4
                          Before changes in the scope of consolidation.
                      5
                          Before amortization of intangible assets from PPA, changes in the scope of consolidation, and special effects.



                      ContiTech                                                            €69.5 million) in the first half of 2010. The return on
                      Sales up 27.7%;                                                      sales increased to 13.3% (PY: 6.0%).
                      Sales up 26.1% before changes in the scope of
                      consolidation and exchange rate effects                              Special effects in the first half of 2010
                      Sales of the ContiTech division rose year-on-year by                 For the ContiTech division, the total net expense from
                      27.7% to €1,477.7 million in the first six months of                 special effects in the first half of 2010 amounted to
                      2010 (PY: €1,157.0 million). Before changes in the                   €2.1 million.
                      scope of consolidation and exchange rate effects,
                      sales were up by 26.1%. This increase occurred in all                Special effects in the first half of 2009
                      business units and resulted primarily from the recovery              The closure and transfer of Western European loca-
                      of the auto markets, but also from the division’s non-               tions of the ContiTech division’s Fluid Technology
                      automotive business. Automotive original equipment                   business unit led to restructuring expenses of €25.6
                      sales rose some 47%, automotive replacement sales                    million in the first half of 2009.
                      roughly 19%, and non-automotive business sales by
                      approximately 10%.                                                   The antitrust proceedings initiated in 2007 against
                                                                                           Dunlop Oil & Marine Ltd., UK, a subsidiary of Conti-
                      Adjusted EBIT up €100.9 million                                      Tech AG, in the area of offshore hoses, resulted in
                      The ContiTech division’s adjusted EBIT was up in the                 further expenses of €1.2 million.
                      first six months of 2010 compared with the same
                      period of 2009 by €100.9 million, or 101.8%, to                      The first consolidation of the conveyor belt company
                      €200.0 million (PY: €99.1 million), equivalent to 13.6%              Kolubara Univerzal D.O.O., Serbia, led to a gain of
                      (PY: 8.6%) of adjusted sales.                                        €0.7 million from the negative balance.

                      EBIT up €127.4 million                                               In the ContiTech division, unutilized provisions totaling
                      Compared with the same period of last year, the                      €0.3 million were reversed during the first half of 2009
                      ContiTech division reported an increase in EBIT of                   in connection with restructuring measures. This was
                      €127.4 million, or 183.3%, to €196.9 million (PY:




26
partially offset by an asset impairment in the amount of      The possibilities of reducing net indebtedness in 2010
€0.1 million.                                                 continue to be limited. Our leeway for debt reduction is
                                                              restricted primarily by the expected €400 million in-
The cost-cutting program initiated worldwide in re-           crease in capital expenditures, cash outflow of approx-
sponse to the economic crisis led to expenses for             imately €300 million for the restructuring measures
severance payments of €2.7 million.                           implemented in 2009, and the increase in working
                                                              capital in response to the better-than-expected busi-
The total net expense from special effects in the first       ness development. The remaining outflow of approx-
half of 2009 amounted to €28.6 million for the Conti-         imately €300 million (making a total of roughly €600
Tech division.                                                million) for the restructuring measures implemented in
                                                              2009 will be incurred in particular in 2011.
Report on Expected Developments and
Outlook for the Corporation                                   After the successful placement of the eurobond, an
After the very stable development of vehicle produc-          initial step in improving our debt maturity profile has
tion in the first half of 2010, we are lifting our forecast   been achieved. A eurobond with a principal amount of
for global vehicle production from 63.0 million to 68.0       €750 million was placed with qualified investors in mid-
million units for 2010 (+16%). As things look now, this       July, as had been announced. The notes have a term
growth will be driven primarily by Asia and NAFTA. For        of five years and the interest rate is 8.5% p.a. Thanks
these two markets, increases in production of 28.2            to the conditions, which turned out better than ex-
million to 33.0 million units (+17%) and of 8.5 million to    pected, and the persistently low money market interest
11.5 million units (+35%) respectively are to be as-          levels, interest expense in 2010 should be approx-
sumed at present. For Europe, which is Continental’s          imately €750 million.
most important sales market, we anticipate a mod-
erate increase in vehicle production from 16.8 million
to 17.7 million units (+6%). The uncertainties remain
however for Europe after the expiration of assistance
programs that were initiated in 2009 in numerous
countries (car scrapping incentives).

The trend in demand for replacement tires was also
very stable, requiring that the market forecast be in-
creased as well. As things look now, we assume that
the replacement markets for passenger and light-duty
commercial vehicle tires will rise by 4% to 6% in Eu-
rope and NAFTA.

In view of the development of Continental’s most
important sales markets, we are upping our sales
forecast from at least 5% to approximately 15% for
2010. We still expect a significant year-on-year in-
crease in adjusted EBIT. From the current perspective,
we anticipate that the adjusted EBIT margin will be in
the range of 8.0% to 8.5% for 2010. Here, we expect
to be burdened with roughly an additional €250 million
from rising raw material costs in the second half of
2010 alone. Special effects, which amounted to €70.3
million in the first half of 2010, are expected to total
about €100 million for the whole year.




                                                                                                                         27
     Half-Year Financial Report as of June 30, 2010




                      Consolidated Financial Statements
                      as of June 30, 2010
                      Consolidated Statements of Income and Comprehensive Income

                      in € millions                                                                January 1 to June 30             Second Quarter
                                                                                                        2010            2009          2010               2009
                      Sales                                                                         12,654.4         9,063.2       6,657.7            4,761.2
                      Cost of sales                                                                 -9,785.1        -7,466.5       -5,169.6           -3,820.3
                      Gross margin on sales                                                          2,869.3         1,596.7       1,488.1              940.9
                      Research and development expenses                                               -754.4          -730.6         -379.4            -344.1
                      Selling and logistics expenses                                                  -640.6          -567.9         -332.2            -283.1
                      Administrative expenses                                                         -306.6          -301.5         -159.2            -153.1
                      Other income and expenses                                                       -197.0           -73.7         -124.5              -66.2
                      At-equity share in earnings of associates                                         36.5           -56.8           22.7              -58.0
                      Other income from investments                                                       3.9             7.6           1.2                2.4
                      Earnings before interest and taxes                                             1,011.1          -126.2         516.7               38.8
                      Interest income                                                                   11.9            15.7            6.1                6.0
                                         1
                      Interest expense                                                                -333.8          -344.9         -174.3            -207.3
                      Net interest expense                                                            -321.9          -329.2         -168.2            -201.3
                      Earnings before taxes                                                            689.2          -455.4         348.5             -162.5
                      Income tax expense                                                              -303.2            13.2         -206.8              -17.9
                      Net income                                                                       386.0          -442.2         141.7             -180.4
                      Non-controlling interests                                                        -37.1           -14.9          -20.5               -9.4
                      Net income attributable to the shareholders of the parent                        348.9          -457.1         121.2             -189.8


                      Undiluted earnings per share in €                                                 1.74           -2.70           0.61             -1.12
                      Diluted earnings per share in €                                                   1.74           -2.70           0.61             -1.12
                      1
                          Including gains/losses from foreign currency translation and gains/losses from the change in the fair value of derivative
                          instruments.



                      in € millions                                                                January 1 to June 30             Second Quarter
                                                                                                        2010           20091          2010              20091
                      Net income                                                                       386.0          -442.2         141.7             -180.4
                                                             2
                      Difference from currency translation                                             545.1           143.6         227.2              137.3
                      Available-for-sale financial assets                                                 1.5             —             0.1                —
                      Deferred taxes on available-for-sale financial assets                              -0.5             —            -0.1                —
                      Cash flow hedges                                                                 -26.0           -27.6           -2.0              27.0
                      Deferred taxes on cash flow hedges                                                  8.2             7.8           0.9               -8.8
                      Share of other comprehensive income of associates                                    —              —              —                 —
                      Other comprehensive income                                                       528.3           123.8         226.1              155.5
                      Total comprehensive income                                                       914.3          -318.4         367.8              -24.9
                      Non-controlling interests                                                         71.5            11.5           36.1                9.4
                      Total comprehensive income attributable to the shareholders of the
                      parent                                                                           842.8          -329.9         331.7               -34.3
                      1
                          The comparative figures as of June 30, 2009, are shown adjusted accordingly.
                      2
                          Including non-controlling interests.




28
Consolidated Balance Sheets

Assets in € millions                                                    June 30, 2010   Dec. 31, 2009   June 30, 2009
Goodwill                                                                      5,676.5         5,536.6         6,428.3
Other intangible assets                                                       1,946.3         2,068.7         2,309.9
Property, plant, and equipment                                                5,947.4         5,784.3         6,044.5
Investment properties                                                            18.7            19.3            16.8
Investments in associates                                                      401.2           398.0           472.1
Other investments                                                                 7.0             8.0             9.5
Deferred tax assets                                                            726.7           728.9           443.0
Deferred pension charges                                                         76.3            70.8            83.5
Long-term derivative instruments and interest-bearing investments                89.4            78.4            15.0
Other long-term financial assets                                                 19.8            18.9            35.1
Other assets                                                                     13.3            12.7            12.6
Non-current assets                                                           14,922.6       14,724.6         15,870.3
Inventories                                                                   2,529.1         2,076.0         2,246.8
Trade accounts receivable                                                     4,778.4         3,648.1         3,202.1
Other short-term financial assets                                              209.1           184.9           159.0
Other assets                                                                   597.1           540.5           596.5
Income tax receivable                                                          140.6             94.2          101.5
Short-term derivative instruments and interest-bearing investments               46.3            25.8            39.2
Cash and cash equivalents                                                     1,239.4         1,712.8         2,000.5
Assets held for sale                                                             23.3            42.3            45.4
Current assets                                                                9,563.3         8,324.6         8,391.0
Total assets                                                                 24,485.9       23,049.2         24,261.3




Total equity and liabilities in € millions                              June 30, 2010   Dec. 31, 2009   June 30, 2009
Common stock                                                                   512.0           432.6           432.6
Capital reserves                                                              4,140.7         3,139.5         3,125.5
Retained earnings                                                              985.3           636.4          1,827.9
Other comprehensive income                                                       47.8          -435.9          -422.3
Equity attributable to the shareholders of the parent                         5,685.8         3,772.6         4,963.7
Non-controlling interests                                                      328.1           289.1           274.7
Total equity                                                                  6,013.9         4,061.7         5,238.4
Provisions for pension liabilities and other post-employment benefits         1,410.9         1,345.0          774.7
Deferred tax liabilities                                                       202.9           196.5           335.3
Long-term provisions for other risks                                           363.8           351.7           384.6
Long-term portion of indebtedness                                             6,061.9         5,967.7         9,559.6
Other non-current liabilities                                                    38.7            36.2            42.0
Non-current liabilities                                                       8,078.2         7,897.1        11,096.2
Trade accounts payable                                                        3,244.5         2,819.5         2,464.1
Income tax payable                                                             731.1           644.7           521.4
Short-term provisions for other risks                                         1,328.2         1,342.9          929.3
Indebtedness                                                                  3,330.1         4,744.8         2,241.7
Other short-term financial liabilities                                         937.0           880.3          1,035.6
Other liabilities                                                              822.9           648.1           693.3
Liabilities held for sale                                                          —             10.1            41.3
Current liabilities                                                          10,393.8       11,090.4          7,926.7
Total equity and liabilities                                                 24,485.9       23,049.2         24,261.3




                                                                                                                        29
     Half-Year Financial Report as of June 30, 2010




                      Consolidated Cash Flow Statements

                      in € millions                                                          January 1 to June 30         Second Quarter
                                                                                                 2010          2009         2010           2009
                      EBIT                                                                    1,011.1        -126.2        516.7            38.8
                      Interest paid                                                            -384.2        -391.6       -140.3       -145.5
                      Interest received                                                          11.8          15.8           5.3            5.2
                      Income tax paid                                                          -228.4          -46.5      -165.0            -7.7
                      Dividends received                                                         37.1          50.8         17.8            17.3
                      Depreciation, amortization and impairments                                813.2         823.4        419.3           408.9
                      At-equity share in earnings of associates and accrued dividend
                      income from other investments, incl. Impairments                           -40.4         49.1         -23.9           55.5
                      Gains from the disposal of assets, subsidiaries and business units          -3.0          -5.5         -3.9           -5.2
                      Other non-cash items                                                         6.9              —       21.4             —
                      Changes in
                             Inventories                                                       -287.7         372.7       -113.6           329.3
                             Trade accounts receivable                                         -857.5         148.6       -141.1           268.1
                             Trade accounts payable                                             260.4          -44.6       227.2           116.0
                             pension and post-employment provisions                              26.9         134.1           5.1           14.5
                             other assets and liabilities                                        16.8          17.5         -46.0          197.7
                      Cash provided by operating activities                                     383.0         997.6        579.0      1,292.9
                      Proceeds on disposal of property, plant, equipment and intangible
                      assets                                                                     14.5          34.6           7.1           23.0
                      Capital expenditure on property, plant, equipment and software           -430.0        -413.7       -252.0       -173.9
                      Capital expenditure on intangible assets from development projects
                      and miscellaneous                                                          -31.8         -23.3        -20.8          -22.0
                      Proceeds on disposal of subsidiaries and business units, including
                      surrendered cash and cash equivalents                                      30.6         137.0           6.8          137.4
                      Acquisition of subsidiaries and business units, incl. acquired cash
                      and cash equivalents                                                       -10.2         -43.8         -0.8           -0.9
                      Interest bearing advances                                                    —                1.4       —              0.0
                      Cash used for investing activities                                       -426.9        -307.8       -259.7           -36.4


                      Cash flow before financing activities                                      -43.9        689.8        319.3      1,256.5
                      Change in indebtedness                                                  -1,567.8       -271.5       -509.0       -463.9
                      Successive purchases                                                       -21.1              —       -21.1            —
                      Proceeds from the issuance of shares                                    1,056.0               —        -0.8            —
                      Dividends paid and repayment of capital to non-controlling interests       -22.1          -7.4        -21.2           -1.4
                      Cash used for financing activities                                       -555.0        -278.9       -552.1       -465.3


                      Change in cash and cash equivalents                                      -598.9         410.9       -232.8           791.2
                      Cash and cash equivalents at the beginning of the reporting period      1,712.8       1,569.4       1,410.3     1,206.5
                      Effect of exchange rate changes on cash and cash equivalents              125.5          20.2         61.9             2.8
                      Cash and cash equivalents at the end of the reporting period            1,239.4       2,000.5       1,239.4     2,000.5




30
Consolidated Statements of Changes in Total Equity

                                                                      Succes-                           Non-con-
                            Number Common Capital         Retained sive share Other comprehen-             trolling
                          of shares1 stock reserves       earnings purchases2       sive income Subtotal interests             Total
                                                                                     Difference from

                                                                                   currency financial
                                                                                      trans- instru-
in € millions         (thousands)                                                    lation3 ments4


At Jan. 1, 2009            169,006      432.6 3,097.9       2,217.2        -33.4     -346.0   -102.9    5,265.4     264.5    5,529.9
Net income                      —          —         —       -457.1           —          —        —     -457.1       14.9    -442.2
Comprehensive
income5                         —          —         —           —            —       147.0    -19.8     127.2        -3.4    123.8
Net profit for the
period                          —          —         —       -457.1           —       147.0    -19.8    -329.9       11.5    -318.4
Dividends
paid/declared                   —          —         —           —            —         —         —         —       -10.8      -10.8
Issuance of shares6             —          —        7.6          —            —         —         —         7.6        —         7.6
Successive
purchases5                      —          —         —           —           0.6        —         —         0.6       -4.2      -3.6
Changes in non-
controlling interests7          —          —         —           —            —         —         —         —        13.7       13.7
Euro introduction in
Slovakia                        —          —         —          67.8          —       -67.8       —         —          —          —
Schaeffler investor
agreement                       —          —       20.0          —            —         —         —       20.0         —        20.0
At June 30, 2009           169,006      432.6 3,125.5       1,827.9        -32.8     -266.8   -122.7    4,963.7     274.7    5,238.4


At Jan. 1, 2010            169,006      432.6 3,139.5         636.4        -34.4     -276.0   -125.5    3,772.6     289.1    4,061.7
Net income                      —          —         —        348.9           —         —         —      348.9       37.1     386.0
Comprehensive
income                          —          —         —           —            —       510.7    -16.8     493.9       34.4     528.3
Net profit for the
period                          —          —         —        348.9                   510.7    -16.8     842.8       71.5     914.3
Dividends
paid/declared                   —          —         —           —            —         —         —         —       -22.7      -22.7
                      6
Issuance of shares          31,000       79.4 1,001.2            —            —         —         —     1,080.6        —     1,080.6
Successive
purchases                       —          —         —           —         -10.2        —         —       -10.2     -11.6      -21.8
Changes in non-
controlling interests7          —          —         —           —            —         —         —         —          1.8       1.8
At June 30, 2010           200,006      512.0 4,140.7         985.3        -44.6      234.7   -142.3    5,685.8     328.1    6,013.9
1
    Shares outstanding.
2
    Successive acquisitions of shares of fully consolidated companies and companies consolidated according to the equity method.
3
    Includes the shareholders’ €0.0 million (PY: €0.0 million) portion of the foreign currency translation of companies consolidated
    according to the equity method.
4
    The difference from financial instruments, including deferred taxes, is mainly due to the change in the market value of the cash
    flow hedges on interest and currency.
5
    The comparative figures as of June 30, 2009, are shown adjusted accordingly.
6
    Includes the expenditure resulting from stock option plans and the redemption offer for granted and not yet exercised stock
    options. The proceeds from the capital increase, net of tax effects, are also included in 2010.
7
    Relates to changes in non-controlling interests from consolidation changes or capital increases.




                                                                                                                                       31
     Half-Year Financial Report as of June 30, 2010




                      Explanatory Notes to the Consolidated Financial Statements

                      Segment report by division for the period from January 1 to June 30, 2010

                                                                                                                                      Passenger and
                      in € millions                                            Chassis & Safety       Powertrain         Interior   Light Truck Tires
                      Sales                                                             2,827.4          2,310.3        2,776.8              2,777.9
                      EBIT                                                                   309.2         -43.7            95.2               501.3
                      in % of sales                                                           10.9          -1.9             3.4                18.0
                      Depreciation and amortization1                                         160.1        219.9           209.6                120.1
                      Capital expenditure2                                                    69.8         97.5             70.7               131.2
                      Operating assets (at June 30)                                     4,051.8          3,215.2        4,425.2              2,411.9
                      Number of employees at June 303                                       28,875       25,676          28,727               27,430


                                                                                    Commercial                            Other/        Continental
                      in € millions                                                Vehicle Tires      ContiTech    Consolidation        Corporation
                      Sales                                                                  630.6       1,477.7         -146.3             12,654.4
                      EBIT                                                                    -7.5        196.9            -40.3             1,011.1
                      in % of sales                                                           -1.2         13.3              —                   8.0
                                                      1
                      Depreciation and amortization                                           54.5         47.5              1.5               813.2
                      Capital expenditure2                                                    18.8         41.8              0.3               430.1
                      Operating assets (at June 30)                                          647.4       1,086.0           -51.5            15,786.0
                      Number of employees at June 303                                        6,910       24,919             228             142,765




                      Segment report by division for the period from January 1 to June 30, 2009

                                                                                                                                      Passenger and
                      in € millions                                            Chassis & Safety       Powertrain         Interior   Light Truck Tires
                      Sales                                                                 1,916.1      1,487.5        2,004.3              2,115.2
                      EBIT                                                                    56.4        -252.7         -244.4                282.8
                      in % of sales                                                             2.9        -17.0           -12.2                13.4
                      Depreciation and amortization1                                         165.6        220.8           228.2                116.2
                      Capital expenditure2                                                    61.8        127.9             64.5                92.1
                      Operating assets (at June 30)                                         4,143.1      3,662.9        4,540.2              2,367.0
                      Number of employees at June 303                                       25,601       23,102          27,028               25,935


                                                                                     Commercial                      Other/Con-         Continental
                      in € millions                                                 Vehicle Tires     ContiTech       solidation        Corporation
                      Sales                                                                  477.8      1,157.0            -94.7             9,063.2
                      EBIT                                                                    -14.0        69.5            -23.8              -126.2
                      in % of sales                                                            -2.9         6.0              —                  -1.4
                      Depreciation and amortization1                                           41.6        50.4              0.6               823.4
                      Capital expenditure2                                                     21.1        46.1              0.2               413.7
                      Operating assets (at June 30)                                          651.4        995.0             43.0            16,402.6
                      Number of employees at June 303                                        7,434       21,219             215             130,534
                      1
                          Excluding write-downs of investments.
                      2
                          Capital expenditure on property, plant, equipment and software.
                      3
                          Excluding trainees.




32
Reconciliation of EBIT to Net Income

in € millions                                                    January 1 to June 30         Second Quarter
                                                                     2010          2009         2010           2009
Chassis & Safety                                                     309.2          56.4       160.2            71.0
Powertrain                                                           -43.7        -252.7       -22.1        -102.4
Interior                                                              95.2        -244.4        40.3        -143.0
Passenger and Light Truck Tires                                      501.3        282.8        286.6           190.8
Commercial Vehicle Tires                                              -7.5         -14.0       -13.4            -0.3
ContiTech                                                            196.9          69.5       104.7            34.9
Other/consolidation                                                  -40.3         -23.8       -39.6           -12.2
EBIT                                                               1,011.1        -126.2       516.7            38.8
Net interest expense                                                -321.9        -329.2      -168.2        -201.3
Earnings before taxes                                                689.2        -455.4       348.5        -162.5
Income tax expense                                                  -303.2          13.2      -206.8           -17.9
Net income                                                           386.0        -442.2       141.7        -180.4
Non-controlling interests                                            -37.1         -14.9       -20.5            -9.4
Net income attributable to the shareholders of the parent            348.9        -457.1       121.2        -189.8
Undiluted earnings per share in €                                     1.74         -2.70        0.61           -1.12
Diluted earnings per share in €                                       1.74         -2.70        0.61           -1.12




Accounting principles                                       Although certain elements of the corporation’s busi-
This Interim Report, as presented, has been prepared        ness are seasonal, the overall comparability of the
in accordance with the International Financial Report-      interim consolidated financial statements is not com-
ing Standards (IFRS) applicable on the closing date         promised. All significant effects in the current period
and endorsed by the European Union, as well as the          are shown in the financial summaries or in the accom-
interpretations of the International Financial Reporting    panying explanations. Changes in the recognition or
Interpretation Committee (IFRIC). The Interim Report        valuation of assets and liabilities within the scope of
was drawn up in compliance with IAS 34, Interim             company acquisitions are applied retrospectively once
Financial Reporting. The same accounting principles         the final purchase price allocation has been deter-
and basis of valuation are applied in the Interim Report    mined.
as were used in the annual financial statements for
2009. These methods are disclosed in detail in the          The consolidated financial statements have been pre-
Annual Report 2009. In addition, the IFRS amend-            pared in euros. Unless otherwise stated, all amounts
ments and new IFRS regulations mandated as of June          presented are in millions of euros. We point out that
30, 2010, are applied in the Interim Report. These          differences may arise as a result of the use of rounded
mandatory amendments and new regulations were               amounts and percentages.
disclosed in detail in the Annual Report 2009. They
had no material effect on the Continental Corporation.

Taxes are calculated based on the estimated,
weighted-average annual tax rate expected for the
year as a whole, taking into account the tax impact of
specific significant items not expected to reoccur in
the remainder of the year.




                                                                                                                       33
     Half-Year Financial Report as of June 30, 2010




                      Pension obligations
                      Consolidated net pension expenses of the Continental Corporation can be summarized as follows:

                      in € millions                                  January 1 to June 30, 2010                      January 1 to June 30, 2009
                                                              Ger-     USA/                                  Ger-      USA/
                                                             many      CAN        UK      Others    Total   many       CAN        UK     Others     Total
                      Current service cost                    25.3       4.4      1.4        5.4     36.5     25.7        4.0      1.4       4.9     36.0
                      Interest on defined benefit
                      obligation                              43.8      27.0      5.4        4.9     81.1     43.7       27.7      5.3       5.0     81.7
                      Expected return on plan assets         -14.7     -25.8     -5.7       -2.4    -48.6    -29.4      -23.6     -5.2       -2.0   -60.2
                      Amortization of actuarial gains
                      and losses as well as other costs        0.0      10.3      0.8        0.6     11.7      2.3       13.5      0.3       0.1     16.2
                      Effects of asset limitation and
                      curtailments                              —        1.7       —          —       1.7       —        -0.1      0.0       0.0     -0.1
                      Net periodic pension cost               54.4      17.6      1.9        8.5     82.4     42.3       21.5      1.8       8.0     73.6




                      The refunds from the Contractual Trust Arrangements                  the respective CTAs as qualifying plan assets in 2009
                      (CTAs) set up in Germany, the asset reclassification                 had a negative impact of €15.8 million on EBIT and
                      and restructuring within the CTAs, as well as the dis-               thus on the net pension expenses in the period under
                      continuation of the status of the remaining assets of                review compared to the same period of 2009.



                      Consolidated net expenses for retirement healthcare and life insurance obligations of the Continental Corporation
                      in the U.S.A. and Canada are made up of the following:

                      in € millions                                                                                             January 1 to June 30
                                                                                                                                    2010            2009
                      Current service cost                                                                                             0.9             2.1
                      Interest cost on defined benefit obligation                                                                      5.6             6.1
                      Amortization of actuarial gains and losses as well as other costs                                                0.0           -2.5
                      Net cost of other post-employment benefits                                                                       6.5             5.7




                      Cash changes in post-employment obligations                           employment benefits totaled €7.5 million (PY: €6.6
                      Pension funds exist solely for pension obligations,                   million).
                      particularly in Germany, the U.S.A., Canada and the
                      United Kingdom, and not for other benefit obligations.                Companies consolidated
                      The companies of the Continental Corporation paid                     In addition to the parent company, the consolidated
                      €24.5 million (PY: €5.9 million) into these pension                   financial statements include a total of 357 domestic
                      funds for the period from January 1 to June 30, 2010.                 and foreign companies in which Continental AG holds
                      From the CTAs and from assets transferred to a trus-                  a direct or indirect interest of at least 20% of the voting
                      tee in this conjunction, there was a refund in the first              rights. Of these companies, 312 are fully consolidated
                      half of 2009 totaling €112.1 million for pension pay-                 and 45 are carried at equity.
                      ments that arose since the creation of the CTAs and
                      advanced by the Continental Corporation to date.                      Since December 31, 2009, the total number of consol-
                                                                                            idated companies has increased by two. Five compa-
                      In the period from January 1 to June 30, 2010, pay-                   nies were founded and seven units were acquired.
                      ments for retirement benefit obligations totaled €91.9                Three companies were merged, five units sold and two
                      million (PY: €82.8 million). Payments for other post-                 companies deconsolidated.




34
Since June 30, 2009, the net number of consolidated         idation took place as of May 1, 2010. The purchase
companies has decreased by one. Reductions in the           price amounts to €10.2 million.
scope of consolidated companies relate primarily to
mergers and disposals in the Automotive divisions and       Further acquisitions relate to the purchase of shares in
in the ContiTech division as well as deconsolidations       a European tire sales group.
and liquidations in the ContiTech division. The addi-
tions pertain chiefly to the founding of new companies      The effects of these transactions, including the corres-
within the scope of the carve-out and acquisitions in       ponding preliminary purchase price allocations, on the
the Rubber divisions.                                       net assets, earnings and financial position of the Con-
                                                            tinental Corporation as of June 30, 2010, are imma-
Acquisition and sale of companies                           terial.
In the period under review, the full purchase price of
€6.2 million for the acquisition of 49% of the shares in    The effects of the final purchase price settlement from
Avtoelektronika-Elkar (Avtel), Kaluga, Russia, was paid.    the sale of VDO Automotive Huizhou Co. Ltd, Huizhou,
                                                            China, in February 2010, which resulted in proceeds of
The increase of shareholdings from 51% in each case         €25.3 million after withholding tax, are immaterial. The
to currently 60% in Continental Automotive Corpora-         sale of two small business operations of ContiTech
tion, Yokohama, Japan, as well as in Continental Au-        that had been held for sale also had no material effect
tomotive Corp. Lian Yun Gang Co. Ltd., Lian Yun             on the net assets, earnings and financial position of
Gang, China, strengthens the corporation’s position         Continental as of June 30, 2010.
on the components and systems market, especially for
brake systems, making it possible to market an ex-          Impairment
panded product portfolio. Continental AG, Hanover,          Continental immediately reviews intangible assets and
increased its shareholding by unilateral capital increas-   property, plant, and equipment as well as investment
es as well as by purchasing treasury stock from the         property as soon as there is an indication of impair-
present joint venture partner Nisshinbo Holdings Inc.,      ment. In the period under review, this resulted in ex-
Tokyo, Japan, through Continental Automotive Corpo-         penses totaling €14.7 million, primarily for the Hanov-
ration, Yokohama, Japan, at a price of €16.7 million.       er-Stöcken location in Germany with €13.8 million and
The relevant agreements went into effect on April 1,        the Costa Rica location with €7.2 million. These ex-
2010. The companies are assigned to the Chassis &           penses were partially offset by write-ups for the loca-
Safety division. The difference between the purchase        tion in Huntsville, U.S.A., chiefly as a result of further
price, capital increases and the non-controlling inter-     possibilities of utilizing machinery within the corpora-
ests totaled -€5.5 million and was recognized directly      tion. No material impairments resulted from such re-
in equity.                                                  views in the first half of 2009.

To strengthen its position on the Chinese market for        The disposal of the associate Hyundai Autonet Co.
drive belts, ContiTech AG, Hanover, purchased the           Ltd., Kyoungki-do, South Korea, led to the recognition
residual 40.0% of the shares in ContiTech-Jiebao            of impairment losses in the amount of €73.6 million in
Power Transmission Systems Co., Ltd., Ninghai, Chi-         2009.
na, at a price of €4.4 million. The purchase agreement
was signed on May 2, 2010. The difference between           Dividend payment
the purchase price and the non-controlling interests        Due to Continental AG’s net loss for the year, no divi-
totaled -€3.3 million and was recognized directly in        dend was distributed for fiscal 2009. Nor was a divi-
equity.                                                     dend distributed in the same period of 2009 for fiscal
                                                            2008, also due to Continental AG’s net loss for the
To strengthen its special-purpose conveyor belts            year.
business, ContiTech Transportbandsysteme GmbH,
Northeim, took over the Moers plant of Metso Minerals       Earnings per share
(Deutschland) GmbH under an asset deal. First consol-       Undiluted earnings per share for the first half of 2010
                                                            amounted to €1.74 (PY: -€2.70) and €0.61 for the




                                                                                                                         35
     Half-Year Financial Report as of June 30, 2010




                      period April 1 to June 30, 2010, (PY: -€1.12), and cor-     as well as certain bank account deposits and the
                      responded to the diluted earnings per share.                cession of receivables within the corporation. Further
                                                                                  collateral was not provided for the VDO loan or for the
                      Contingent liabilities and other financial obligations      forward start facility.
                      As of June 30, 2010, there were no material changes
                      in the non-recognized contingent liabilities and other      Furthermore, receivables in connection with asset-
                      financial obligations as described in the Annual Report     backed securitization programs were also assigned as
                      2009. In the future, an associated company could face       collateral for the liability under the loan from the Euro-
                      significant obligations arising from preliminary investi-   pean Investment Bank.
                      gations by the European Commission of alleged anti-
                      trust violations by automotive electronics suppliers, if    Income tax expense
                      antitrust violations are found.                             Income tax expense in the first six months of 2010
                                                                                  amounted to €303.2 million (PY: income of €13.2
                      Transactions with related parties                           million).
                      In the period under review, there were no material
                      changes in the nature of transactions with related          Tax expense in the period under review was influenced
                      parties compared with December 31, 2009. In the             primarily by the €88.0 million valuation allowance of
                      same period of 2009, Continental AG and the Schaeff-        deferred tax assets resulting from interest carryfor-
                      ler Group agreed upon a global purchasing coopera-          wards in Germany. The valuation allowance included
                      tion with the goal of minimizing the cost of materials as   both the interest carryforwards from 2009 measured at
                      well as of non-manufacturing materials and achieving        the relevant tax rate totaling €68.9 million as well as
                      benefits.                                                   increases of the year under review amounting to €19.1
                                                                                  million in full, taking into account tax planning options.
                      German Corporate Governance Code                            Utilization of the interest carryforwards does not ap-
                      The annual declaration in accordance with Section 161       pear to be sufficiently probable at this point in time, in
                      of the Aktiengesetz (German Stock Corporation Act)          view of the rating downgrade of Continental AG in May
                      regarding the German Corporate Governance Code              2010 in particular, together with higher interest mar-
                      from the Executive Board and Supervisory Board of           gins on existing loans, as well as the resulting future
                      Continental AG is made permanently available to             increases in interest burden from the issuance of the
                      shareholders on Continental’s website. Earlier declara-     eurobond with an aggregate principal amount of
                      tions in accordance with Section 161 of the Aktienge-       €750.0 million in July 2010.
                      setz also can be found on the website.
                                                                                  Tax expense in the first half of 2009 was influenced
                      Segment Reporting                                           primarily by the valuation allowance of deferred tax
                      Comments on the development of Continental AG’s             assets on tax loss and interest carryforwards in an
                      six divisions are provided in the Corporate Manage-         amount of €107.0 million in Germany. This was neces-
                      ment Report as of June 30, 2010.                            sary because, according to the opinion of the German
                                                                                  finance authorities, a harmful change of shareholder
                      Indebtedness and net income from financial                  already occurred according to Section 8c of the
                      activities                                                  Körperschaftsteuergesetz (German Corporate Tax
                      Comments on indebtedness and the net income from            Law) since, with the acquisition of shares by Schaeffler
                      financial activities are provided in the Corporate Man-     KG in 2008, the 25% threshold was exceeded. Conti-
                      agement Report as of June 30, 2010.                         nental does not agree with this interpretation of the
                                                                                  law and has already appealed the decision in a test
                      As agreed in the renegotiation of the VDO loan and the      case.
                      forward start facility, Continental AG and certain of its
                      subsidiaries have for the first time granted the creditor   Since 2008, a limit on the deductible interest that can
                      banks a collateral package. This package consists of        be carried forward has applied in Germany; the
                      guarantees from certain subsidiaries, the pledge of         amount deductible under the tax law is limited to 30%
                      holdings in the subsidiaries providing the guarantees,      of the taxable income before write-downs and interest.




36
Capital increase                                            creased share capital of Continental AG. The free float
On January 6, 2010, the Executive Board of Continen-        of the Continental share therefore increased to 24.9%.
tal AG resolved – with Supervisory Board approval –
an increase in the share capital of €432,655,316.48 by      The inclusion of the new shares in trading on the regu-
a    nominal     amount     of    €79,360,000.00    to      lated market of the stock exchanges of Frankfurt,
€512,015,316.48 by issuing 31,000,000 new shares            Hanover, Hamburg and Stuttgart began on Janu-
from authorized capital (Authorized Capital 2007).          ary 14, 2010. The delivery and settlement of the new
                                                            shares subscribed in the rights offering or otherwise
The capital increase was implemented by way of a            not subscribed took place on January 28, 2010.
rights offering to the shareholders of Continental AG.
In an initial step, a bank consortium led by Deutsche       Shareholder structure
Bank AG, Goldman Sachs International and J.P. Mor-          On June 29, 2010, Schaeffler GmbH notified Conti-
gan Securities Ltd. placed 24.55 million shares with        nental Aktiengesellschaft that the voting rights share of
institutional investors in a private placement on Janu-     Schaeffler GmbH in the company had exceeded the
ary 6, 2010. An additional 6.45 million shares were         thresholds of 3%, 5%, 10%, 15%, 20%, 25% and 30%
placed with institutional investors at a price of €40.00    on June 28, 2010, and was 42.17% on that day. After
on January 12 as part of an accelerated bookbuilt           the completion of the capital increase in January 2010,
offering. 3.4 million fewer shares were allotted as a       the further shareholder structure with regard to the
result of the subscription rights exercised by the free     200,005,983 outstanding Continental shares was
float shareholders. The capital increase was accompa-       calculated as follows: 16.48% M.M.Warburg & CO
nied by BNP Paribas, CALYON and HSBC Trinkaus, in           KGaA, 16.48% B. Metzler seel. Sohn & Co. Holding
addition to the institutes already mentioned.               AG. The free float rate is 24.87%.

Existing shareholders could exercise their subscription     Review by an Independent Auditor
rights from January 12 to January 25, 2010, acquiring       The interim management report and the abbreviated
two shares for every eleven shares they possessed at        interim financial statements have not been audited in
the time. The rights trading of the subscription rights     accordance with Section 317 of the Handelsgesetz-
on the Frankfurt Stock Exchange took place from             buch (HGB - German Commercial Code) or reviewed
January 12, 2010, until (and including) January 21,         by a qualified auditor.
2010. The new shares have full dividend entitlement as
of fiscal 2009.

On January 26, 2010, Continental announced that
more than 99% of the free float shareholders had
made use of their subscription rights. Net proceeds
totaled €1,056.0 million before tax effects. The capital
increase served to repay Continental AG’s liabilities
from the VDO loan.

The major shareholders of Continental AG, repre-
senting 88.9% of the share capital of the company
before the capital increase (Schaeffler KG 49.9%,
M.M.Warburg & CO KGaA 19.5%, B. Metzler seel.
Sohn & Co. Holding AG 19.5%) had irrevocably under-
taken vis-à-vis the bank consortium not to exercise
their subscription rights and not to transfer such sub-
scription rights to third parties. Upon the completion of
the rights offering, these major shareholders were
calculated to hold an aggregate of 75.1% of the in-




                                                                                                                        37
     Half-Year Financial Report as of June 30, 2010




                      Significant Events after June 30, 2010

                      Placement of a eurobond                                       “The value of the goodwill reported in the consolidated
                      On July 9, 2010, the Continental Corporation placed a         financial statements of Continental AG as of Decem-
                      euro-denominated bond with an aggregate principal             ber 31, 2008, which was reported at €6.4 billion after
                      amount of €750.0 million and a term of five years with        recognition of an impairment of €1.2 billion, is not
                      qualified investors in Germany and abroad. The notes          proven in its full amount in methodic terms and on the
                      were issued by Conti-Gummi Finance B.V., Amster-              basis of the assumptions made using the impairment
                      dam, the Netherlands, and are guaranteed by Conti-            test performed. The following impairment test led to a
                      nental AG and certain of its subsidiaries. The coupon         further impairment totaling €876 million in the 2009
                      is 8.5% p.a. and interest is payable semi-annually, in        consolidated financial statements. The impairment test
                      arrears. The net proceeds from the issuance were              for goodwill as of December 31, 2008 is in breach of
                      used for early partial repayment of the VDO loan.             IAS 36.33.”

                      Installation of machinery at new Hefei tire plant             The Executive Board of Continental AG has resolved
                      Early in July 2010, the installation of machines was          to accept this error finding. The error finding regarding
                      started in the new car tire plant in Hefei, China. This       the impairment test is limited to the methodic terms.
                      thus successfully completes the first phase of the            The amount of a further impairment could not be cal-
                      project, with a construction area of some 70,000 m².          culated by the FREP. As part of the review proce-
                      The first locally-produced Continental tires are slated       dures, the impairment test carried out in fiscal 2009,
                      to hit the market in China early in 2011. In this first       which led to a further impairment of goodwill in the
                      stage, the Hefei plant is striving for an annual output of    amount of €875.8 million in 2009, was also available to
                      four million car tires. In the long term, capacity is to be   the FREP. With regard to this impairment test, the
                      expanded to deal with the dynamic market growth, not          FREP saw no reason for initiating examinations with
                      only in China but throughout all of Asia as well.             cause in response to the circumstances, i.e., the
                                                                                    goodwill as of December 31, 2009 was reported at an
                      Review by the German Financial Reporting                      appropriate amount.
                      Enforcement Panel (Deutsche Prüfstelle für
                      Rechnungslegung e.V.) of the consolidated                     In accordance with IAS 8.43 in conjunction with IAS
                      financial statements for fiscal 2008                          8.5, the Executive Board of Continental AG considers
                      In May 2009, the German Financial Reporting En-               a retrospective restatement of the consolidated finan-
                      forcement Panel (“FREP”) (Deutsche Prüfstelle für             cial statements as of December 31, 2008 to be im-
                      Rechnungslegung e.V.) initiated a review of the consol-       practicable, as a retrospective restatement in particu-
                      idated and statutory financial statements and the             lar would necessitate extensive estimates and it is
                      management report for Continental AG and for the              impossible to differentiate objectively between informa-
                      corporation (Konzernlagebericht) for fiscal 2008 pur-         tion which was available at the time and developments
                      suant to Section 342b (2) Sentence 3 No. 3 of the             which have actually occurred since then. There will
                      German Commercial Code (HGB). The review was                  also be no effects on the 2010 consolidated financial
                      initiated as a random sampling examination (stich-            statements, since any errors had already been com-
                      probenartige Prüfung). Please refer to the details in the     pensated for by the end of 2009.
                      2009 Annual Report. After completing its audit, the
                      FREP informed us on July 26, 2010 of the following
                      error finding:
                                                                                    Hanover, July 27, 2010

                                                                                    Continental Aktiengesellschaft
                                                                                    The Executive Board




38
Responsibility Statement
To the best of our knowledge, and in accordance with         associated with the expected development of the
the applicable accounting principles for interim financial   corporation for the remaining months of the financial
reporting, the interim consolidated financial statements     year.
give a true and fair view of the earnings, financial and
net assets position of the corporation, and the interim      Hanover, July 27, 2010
management report of the corporation includes a fair
view of the development and performance of the busi-         Continental Aktiengesellschaft
ness and the position of the corporation, together with      The Executive Board
a description of the principal opportunities and risks




                                                                                                                     39
Financial Calendar
2010	
Annual Financial Press Conference                                                                   February 23
Analyst Conference                                                                                  February 23
Annual Shareholders’ Meeting                                                                            April 28
Financial Report as of March 31, 2010                                                                    May 4
Half-Year Financial Report as of June 30, 2010                                                          July 29
Financial Report as of September 30, 2010                                                           November 3



2011	
Annual Financial Press Conference                                                                          March 3
Analyst Conference                                                                                         March 3
Annual Shareholders’ Meeting                                                                               April 28
Financial Report as of March 31, 2011                                                                         May
Half-Year Financial Report as of June 30, 2011                                                              August
Financial Report as of September 30, 2011                                                                  Oktober




Continental Aktiengesellschaft, P.O. Box 169, 30001 Hanover, Germany
Vahrenwalder Straße 9, 30165 Hanover, Germany
Phone +49 511 938 - 01, Fax +49 511 938 - 8 17 70, mailservice@conti.de, www.continental-corporation.com

Continental AG is an Official Sponsor of the 2010 FIFA World Cup South Africa™.

				
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